Australia’s crypto industry is reeling from controversial remarks made by the Australian Securities and Investments Commission’s (ASIC) head of digital assets during a liaison meeting that addressed initial comments on a consultation paper controversial.
Rhys Bollen compared Bitcoin to cigarettes used as currency in prisons while answering questions about the application of cashless payment facilities (NCP) legislation to digital assets, during Wednesday’s meeting.
A PCN refers to any payment method that does not involve physical cash, including digital wallets, credit cards and cryptocurrencies.
The example in question focuses on the use of stablecoins for payments, which ASIC interprets as triggering an NCP event. However, the general language of the guidelines has raised concerns that any digital asset that enables payments, whether Bitcoin or stablecoins, could fall under the NCP classification.
When asked for clarification, Bollen admitted the complexity of the issue, making a provocative analogy.
“In theory, almost anything could be used to make a payment to another person. You know, cigarettes are used in prisons as payment…” Bollen said Wednesday. “If the product is presented as one of its primary uses, and you see it in the marketing… that’s where we get into financial product territory. I don’t really have a bright line test for you.
Industry executives have expressed concerns that applying financial regulation to tools like non-custodial wallets or software could hamper innovation and drive companies overseas.
Michaela Juric, general manager of programs and partnerships at Australian stablecoin project AUDD, criticized the potential implications for widely used crypto tools like MetaMask.
“I think this view sets a pretty dangerous precedent. For example, MetaMask is a non-custodial wallet offering. It is simply software that allows the user to sign transactions,” she said. Decrypt.
“If one of MetaMask’s primary functions is to allow the user to send and receive payments, then this ASIC interpretation may result in MetaMask having to obtain an AFSL to offer its services to Australian users.
“Trying to apply financial regulation and licensing obligations to simple software will push the already growing exodus of products and services out of Australia,” Juric added.
Earlier this month, ASIC released the INFO-225 consultation document proposing updated guidelines to comply with the Corporations Act.
The paper includes 13 examples demonstrating how digital assets such as stablecoins, staking services and tokenized securities can be classified as financial products.
This cryptography problem
Australia has tightened its grip on crypto regulation, with ASIC and the government implementing various measures to control this growing sector.
ASIC has encouraged crypto companies to apply for an Australian Financial Services License (AFSL), providing a grace period in the event of legal action during the application process. However, businesses 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 current financial services licensing framework.
This proposal aims to address consumer harm while supporting innovation within the crypto ecosystem.
ASIC also has revised Regulatory Guide 133 (RG 133) for the first time since June 2022 with new crypto custody requirements.
Key changes include enhanced security protocols such as cold storage and geographically distributed key backups, stricter risk management processes, and multi-signature transaction controls.
Public comment on INFO-225 remains open until February 2025, with finalized guidance expected later in the year.
Edited by Sébastien Sinclair
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