ASIC's Crypto Regulation Remarks Stir Controversy in Australia

According to Decrypt, the Australian crypto industry is facing significant backlash following remarks made by Rhys Bollen, the Digital Assets Lead at the Australian Securities and Investments Commission (ASIC). During a liaison meeting, Bollen compared Bitcoin to cigarettes used as currency in prisons while discussing the application of Non-Cash Payment Facility (NCP) legislation to digital assets. This legislation pertains to any payment method not involving physical cash, such as digital wallets, credit cards, and cryptocurrencies. The discussion centered on the use of stablecoins for payments, which ASIC views as triggering an NCP event. However, the broad language of the guidance has raised concerns that any digital asset facilitating payments, including Bitcoin and stablecoins, could be classified under NCP. Bollen acknowledged the complexity of the issue, using a provocative analogy to illustrate his point. He stated, "In theory, almost anything could potentially be used to make a payment to another person. You know, cigarettes are used in prisons as a way of making payments." He further explained that if a product is marketed as having payment as one of its primary uses, it approaches the territory of being considered a financial product. This lack of a clear distinction has led to apprehension among industry leaders, who fear that applying financial regulation to tools like non-custodial wallets or software could stifle innovation and drive businesses out of Australia. Michaela Juric, known as "Bitcoin Babe," criticized the potential implications for widely used crypto tools like MetaMask. She expressed concern that ASIC's interpretation might require MetaMask to obtain an Australian Financial Services Licence (AFSL) to offer its services to Australian users. Juric warned that imposing financial regulation and licensing obligations on software could exacerbate the existing trend of products and services leaving Australia. Earlier this month, ASIC released the INFO-225 consultation paper, proposing updated guidance for compliance with the Corporations Act. This document includes examples of how digital assets like stablecoins, staking services, and tokenized securities could be classified as financial products. Australia has been tightening its grip on crypto regulation, with ASIC and the government implementing various measures to control the growing sector. ASIC has encouraged crypto companies to apply for an AFSL, offering a grace period from legal action during the application process. However, companies must justify their decision if they choose not to apply. In October 2023, the Australian Treasury released a consultation paper proposing to regulate digital asset intermediaries under the existing financial services licensing framework. This proposal aims to address consumer harms while supporting innovation within the crypto ecosystem. ASIC has also revised Regulatory Guide 133 (RG 133) with new requirements for crypto custody, including enhanced security protocols and stricter risk management processes. Public feedback on INFO-225 remains open until February 2025, with finalized guidance expected later that year.