Australia: ASIC calls for industry feedback on proposals

ASIC has published Consultation Paper 381 proposing to update existing Information Sheet 225: Cryptoassets. ASIC’s proposed amendments aim to bring more digital assets under regulatory control and provide greater insight into ASIC’s assessment of businesses under the current regulatory regime.

in short

On 4 December 2024, ASIC published Consultation Paper 381: INFO 225 Digital Assets Update: Financial Products and Services (“CP 381“), on existing information sheet 225: Cryptoassets (“Information 225”). These proposed updates include providing additional guidance on digital assets, incorporating examples of work and providing transitional relief for businesses that are applying to ASIC for one or more licenses. ASIC seeks feedback on proposed updates in CP 381 , with plans to finalize INFO 225 by mid-2025.

INFO 225 provides guidance for persons providing products or services related to cryptocurrencies and digital assets and helps determine when cryptocurrencies, digital assets or other related products may be considered financial products and therefore are regulated product offerings that may be required A person holding a license to provide financial services related to the financial product.

Due to the rapid and significant development of digital markets in recent years and the emergence of a large number of new digital asset products and services, ASIC identified the need to update INFO 255 ​​in order to align the regulatory regime with ongoing developments. Growth of the digital asset market.

CP 381 proposes practical updates to INFO 255 ​​and invites stakeholders to provide feedback on these proposals. ASIC emphasizes that CP 381 and the subsequent amendments to INFO 255 ​​do not create any new legislation but merely provide ASIC’s view on the interpretation of existing regulations on cryptocurrencies and digital assets under ASIC. Companies Act 2001 (Cth).

In addition to these practical updates, ASIC is proposing to change the title of INFO 255 ​​from “Crypto-Assets” to “Digital Assets” and amend all references to the term throughout the text. ASIC believes that the term “digital assets” refers to a wider scope and encompasses other arrangements such as managed investment schemes and interests in tokenized versions of traditional financial products such as securities. ASIC has made it clear that its intention for INFO 225 is to evolve, so as digital assets continue to evolve, the regulation will be updated accordingly.

Contains working examples

CP 381 recommends the inclusion of worked examples in INFO 225 to provide more detailed background and assistance when interpreting the regulatory regime. Examples of these include those related to exchange tokens, native token staking services, in-game non-fungible tokens (NFTs), yield stablecoins, gold asset reference tokens, membership NFTs, tokens claiming on behalf of prepaid services, fundraising What-if scenarios new blockchains, meme coins, tokenized concert tickets, tokenized securities, digital asset CFDs and digital asset wallets.

While these examples may be helpful, ASIC notes that they are not exhaustive. These examples run under the following assumptions:

• Digital asset products may fall under the definition of multiple financial products
• Although digital assets may not be financial products, when combined with other products or services, the resulting arrangements may constitute financial products
• When determining whether a financial product exists, it must be considered in conjunction with the digital asset token and the rights, interests, expectations and product features associated with the token.

ASIC provides these examples to provide insight into how ASIC considers a specific set of facts that may be encountered.

No action position

As the proposed updates to INFO 225 put many businesses within the scope of needing a license, ASIC proposes to provide transitional relief to digital asset businesses that are genuinely struggling to obtain a license. To qualify for this relief, a business must be operating when CP 381 comes into effect and submit a license application to ASIC when INFO 225 comes into effect. Additional conditions may also be imposed, such as the requirement to hold AFCA membership. Currently, CP 381 excludes certain financial products, such as futures and perpetual derivatives, from being eligible for this relief. However, as ASIC is still in the consultation phase, these exclusions are subject to change based on industry feedback.

Other suggested updates

ASIC has also proposed other updates such as:

• Provide additional guidance on financial investment facilities
• Reducing focus on the role of initial coin offerings
• Expand the good practice guidance currently applicable to responsible entities to also apply to hosting and hosting service providers.

ASIC is seeking feedback on the proposed updates and their potential impact on industry until 5pm on 28 February 2025, and plans to complete the proposed updates to INFO 225 by mid-2025. ASIC stressed that these updates do not change the regulatory obligations imposed on businesses, but rather clarify how ASIC assesses the situation under the current regime. The proposed updates to INFO 255 ​​are intended to encourage entities to evaluate the products and services they offer and conclude that they need to seek relevant permission from ASIC.