Digital assets on the right path: Industry

Digital asset providers have evaluated the October deadline and ASIC's consultation on the looming digital asset laws and determined that these developments mark a pivotal point on the sector's implementation journey.

OKX Australia chief executive Shane Chandra said the consultation highlighted the regulator's application of the principle of 'same activity, same risk, same regulatory outcome' for all digital asset providers.

He said digital assets "do not need special treatment" and that the regulator aims to hold digital asset providers to the same standards as traditional finance.

"With this clarity, mature digital asset firms will be able to offer innovative products to the Australian market within an established regulatory regime," he said.

"ASIC has achieved a challenging goal with this paper. It has laid clear groundwork to apply established financial services principles to a modern and fast-paced industry. The next step is to empower the industry to build within that framework.

"Australia has a real chance to show that digital assets can meet the same standards as the rest of finance and still innovate alongside the world's best. This paper moves us a long way towards that."

He added that many digital assets firms already hold an AFSL with similar or parallel authorisations and a streamlined variation process for these firms will empower the industry to move from clarity to innovation quickly.

Businesses that deal with digital assets had until September 30 to apply for an AFSL.

Challenges beyond obtaining an AFSL

In response to the deadline, CloudTech Group head of compliance William Coles noted one of the most demanding aspects has been the mapping of digital services to appropriate financial services authorisations, including payments, trading and custody, which all require separate considerations.

"The detail matters; the characteristics of the product, which entity provides the service, the customers it serves and the permissions relevant to that activity. This requires close coordination between legal, compliance, technology and operational teams," Coles said.

"The practical challenge is translating that analysis into clear customer documentation and effective day-to-day processes. Our priority is a structure that supports responsible growth and makes responsibilities clear."

He added that not all digital assets are classified as financial products yet and entities should have utilised the grace period to understand the context of their services, "rather than as a blanket requirement for every crypto exchange to have an AFSL granted by that date".

"Our planning brings together Bellevue Hill Capital's existing financial services licence and the proposed authorisations for CloudTechX, with work across product design, governance and operational controls to support the group's development," he said.

Meanwhile, despite holding its AFSL since launch in 2022, AUDC chief executive Effie Dimitropoulos noted that regulation is "not static" and firms will need to continue elevating their frameworks to remain compliant.

One of the more complex issues she highlighted has been applying existing financial services legislation to businesses that perform quite different functions.

"A stablecoin issuer, an exchange, and a custody provider have different obligations and risk profiles, yet much of the regulatory discussion has tended to group them together," Dimitropoulos said.

"Treasury's proposed treatment of payment stablecoins under the stored-value facility framework is an important recognition of that distinction. A fiat-backed stablecoin used for payments and settlement differs fundamentally from a platform that facilitates digital asset trading."

She said Australia is witnessing similar distinctions emerge globally, with regulatory frameworks being "increasingly focused" on the financial function being performed rather than the underlying technology.

Moving forward, she believes getting those distinctions right for Australia will enhance consumer protection and its competition capabilities relative to other jurisdictions.