Government opens digital asset regulation consultation

consultation digital assets cryptocurrency ASIC AFSL

17 October 2023
| By Jasmine Siljic |
image
image
expand image

The government has opened a consultation to increase regulation for digital asset and cryptocurrency platforms by subjecting them to existing Australian financial services laws.

The proposed regulation would require digital asset platforms, which hold over a certain amount in Australian assets ($1,500 for individuals and $5 million in aggregate), to acquire an Australian financial services licence (AFSL).

It would also include those who were providing financial advice on a digital asset, particularly relevant for finfluencers who have come under scrutiny from ASIC in the past.

“Opinions or recommendations intended to influence, or that could reasonably be regarded as intended to influence, a decision about using a digital asset facility would be financial product advice,” it said.

“Giving advice about using a digital asset facility and investing through it – including acquiring, holding and disposing of digital assets (both financial product and non-financial product) through a digital asset platform – raises the same regulatory issues as giving advice about other financial products.

“This would apply to platform providers themselves and impact the nature rewards and other promotions on their websites.”

These platforms would also be required to meet general licence obligations, including:
Providing services honestly and fairly.
Having a dispute resolution system.
Meeting solvency and cash reserve requirements.
Producing financial records and disclosure statements.

Specific obligations would also apply depending on the nature of the platform and token, as well as additional requirements relating to trading, staking, tokenisation and fundraising. 

The regulatory regime would be fit-for-purpose, with a focus on the providers that hold individuals’ digital assets, rather than the token itself, to prevent any exploitation of regulatory loopholes. 

With approximately one in four Australians owning some crypto, the consultation aims to reduce the increasing risk of crypto exchange collapses.

It also seeks to achieve three goals: drive industry innovation and growth, provide certainty and clarity, and protect consumers and their assets.

“The Albanese government is acting methodically to ensure that consumers are adequately protected and innovation can flourish,” said in a joint statement by Stephen Jones, Minister for Financial Services, and Treasurer Jim Chalmers.

“Our proposals have been designed to ensure they are consistent with other jurisdictions, adopt existing financial service laws as appropriate, and create new bespoke obligations in the areas of highest risk.”

According to Jones and Chalmers, the previous government “failed” to implement policies to protect consumers and guide the emerging asset class. 

Speaking at the Australian Financial Review’s Cryptocurrency Summit on Monday, ASIC chairman Joseph Longo said the regulation is about setting minimum standards.

“Crypto must be held accountable to the same high standards we expect of everyone else. Whatever regulatory model the government decides is appropriate, ASIC needs access to the same – or similar – tools as we have for other products and related services,” he commented.

“Lies, theft and investor losses are enemies to be defended against in crypto as in anything else. Questions of governance, risk management, and market abuse still apply.”

Submissions for this consultation will close on 1 December 2023, with further consultation on the draft legislation set to take place in 2024.
 

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 2 weeks ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 2 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 2 weeks ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

6 days ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

3 weeks 5 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

4 weeks 1 day ago