Author: Aiying Ai; Source: AiYing Compliance
Recently, a consultation paper issued by the Australian Securities and Investments Commission (ASIC) has quietly emerged in the discussion center of the digital finance field. This document, titled "CP 381: Updates to the financial product and service regime for digital assets", is not only a dialogue between tradition and innovation, but also a public confrontation between the regulatory authorities and the technological pioneers on the path of global compliance and financial technology evolution. For the Web3 world, its significance goes beyond the evolution of policies, but also serves as a guide for global digital asset practitioners on how to cope with future storms. Aiying Ai, through a unique perspective, delves into this document, exploring its potential impact on the fields of RWA (Real-World Assets), Web3 payments, asset management, stablecoins, and more, aiming to provide insights for industry veterans to address new challenges and seize new opportunities.
I. Digital Asset Regulation: The Confusion of the Old World and the Birth of New Rules
As early as 2017, ASIC first issued a guide on crypto assets, covering the then-emerging ICOs (Initial Coin Offerings). In the initial version of this guide, the regulator attempted to define the boundaries for this new field. However, over time, the world of digital assets has undergone a dramatic change - from a single token to tens of thousands of different categories of digital assets, the evolution of blockchain technology has driven the tokenization of real-world assets (RWA), the way of asset management has been reconstructed, and the concept of stablecoins has gradually become an important part of global payments. ASIC's "INFO 225" has been continuously updated based on this evolution, and in the 2024 update, we see that the regulator's focus has shifted from a single cryptocurrency to a more systematic digital finance ecosystem.
II. The Core of the Document - Defining Boundaries and Repositioning Compliance
The core of "CP 381" is to further update the "INFO 225" guide, aiming to clarify when digital assets become "financial products" and therefore must comply with Australian financial regulations. This update provides an in-depth classification of various forms of digital assets - from stablecoins to tokenized securities, to composite financial service structures, each of which may be included in the regulatory framework of traditional financial products. This means that the future development path of digital assets is not only driven by technology, but also depends on how the regulatory framework adapts to the disruptive forces of these technologies.
This update includes a reassessment of the definition of digital assets, particularly regarding how certain complex types of digital assets may meet the definition of financial products under the Corporations Act 2001. The document clearly states that the criteria for determining financial products cover scenarios of "making a financial investment through a facility, managing financial risks, or making non-cash payments". In addition, the document also introduces the application process for regulatory exemptions, especially for digital asset business providers who provide services related to financial products, who need to obtain an Australian Financial Services (AFS) license.
To be more closely aligned with actual operations, "CP 381" includes multiple real-world cases in its updates, such as:
Regulatory framework for trading tokens and stablecoins: The attributes of stablecoins as financial products will be classified based on their anchoring method to fiat currencies. For example, certain stablecoins, if considered "non-cash payment instruments", will require an AFS license and meet the corresponding licensing requirements.
Tokenized securities of RWA: Some tokenization of real-world assets, if they have attributes similar to securities, such as granting holders a form of profit rights, may be deemed "financial investment instruments" and thus need to comply with securities-related regulations.
Staking Services: Native token staking services, if they provide fixed returns or have certain investment characteristics, may also be considered a financial product.
Regulatory considerations for Non-Fungible Tokens (NFTs): NFTs that only represent artworks or collectibles are generally not financial products, but if they are tied to certain financial arrangements, such as providing partial ownership or future revenue rights, they will need to be evaluated based on the specific circumstances.
ASIC uses these cases to help industry practitioners clarify the compliance requirements for different business forms, and to provide a reference for how to adjust business models to comply with current regulations.
While such updates help to clarify the financial attributes of digital assets, they also reveal the confusion and groping of regulatory authorities when faced with new asset categories. ASIC emphasizes its adherence to "principles-based regulation", trying to govern these emerging technological forms through existing financial regulations. This approach can improve compliance consistency, but often requires more detailed rules and guidance to address the complex and diverse Web3 scenarios. This is precisely the problem that the introduction of multiple cases in the document aims to solve - through specific scenario-based examples, to help practitioners understand how to adjust their businesses to a compliant track.
III. The Current State of the Australian Cryptocurrency Market
The Australian cryptocurrency market has experienced significant development in recent years, showing a trend of diversification and rapid growth. According to a research report in June 2023, about 31.6% of Australians hold or have held cryptocurrencies, ranking among the highest globally. This high participation rate reflects the public's strong interest in digital assets. At the same time, the number of cryptocurrency ATMs in Australia has surged, exceeding 1,200 as of August 2024, making it one of the fastest-growing countries in the world. The widespread deployment of these ATMs has facilitated users' conversion between digital currencies and cash, further promoting the adoption of cryptocurrencies.
In terms of the regulatory environment, Australia has been at the forefront of cryptocurrency regulation. As early as 2017, the government canceled the double goods and services tax on cryptocurrency transactions, reducing transaction barriers. However, with the rapid development of the market, regulatory authorities such as ASIC and the Australian Transaction Reports and Analysis Centre (AUSTRAC) have strengthened their supervision of this field, and the future regulatory framework is expected to be finalized by the mid-2025.
IV. Global Perspective and Policy Impact: Between the Uniformity and Differentiation of Regulation
In the current wave of digital asset regulation, the balance between globalization and localization has become a key factor in determining the success or failure of policies. ASIC's approach to some extent reflects Australia's response to global regulatory trends, such as the policy recommendations for the crypto asset market made by the International Organization of Securities Commissions (IOSCO) mentioned in the document. In other regions, the EU's Markets in Crypto-Assets (MiCA) regulation, as well as the regulations in Singapore, Hong Kong, and other places, also demonstrate the same regulatory logic: based on the principle of "same activity, same risk, same regulation", with adjustments for the unique characteristics of different asset categories. The existence of this convergence and differentiation of regulatory frameworks provides both opportunities and challenges for global Web3 participants.
ASIC also mentioned that the Australian government is pushing forward a new regulatory framework for payment service providers, which will not replace the existing financial services regulations, but rather serve as a supplement. This means that digital asset platforms and digital asset facilities (DAPs and DAFs) need to comply with both the new payment regulations and the traditional financial services regulations. This "dual-track regulation" model is similar to the approaches in Europe, Hong Kong, and other places, ensuring that emerging fintech products enjoy the freedom to innovate while being subject to strict regulation in terms of safety and transparency.
Australia's market and policies are also areas of focus for Aiying, and many clients also choose to take root here. From this ASIC consultation document, it can be seen that the regulatory path for Web3 is becoming increasingly clear. Regulators are no longer just passively responding, but are actively participating, trying to guide the development of technology through new regulations, which means new opportunities for industry practitioners and us. Let's look forward to the final policy details being released.
