ASIC Consults on Updated Crypto Guidance – What’s new?
By: Daniel Knight, Simon Kiburg and Ben Kneebush
The Australian Securities and Investments Commission (ASIC) recently released proposed updates to Information Sheet 225 (INFO 225) and a corresponding consultation paper.
The draft updated INFO 225 represents a substantial expansion of the existing guidance for digital assets in Australia.
This includes financial product and services classifications, licensing, consumer law obligations and design and distribution obligations. If adopted in its current form, the updated guidance could lead to many additional businesses needing to obtain Australian Financial Services Licences (AFSL) and/or Australian Markets Licences (AML).
Financial Product Classifications
ASIC has significantly expanded its current guidance in relation to financial product classifications (e.g. interests in a managed investment scheme, securities, derivatives and non-cash payment facilities) and added guidance for ‘facilities for making a financial investment.’ As such, ASIC has clarified its interpretation of existing financial services laws.
The focus will still be on the rights, benefits, expectations and product features of the digital asset. INFO 225 includes 13 examples to demonstrate how ASIC intends on interpreting the existing financial product classifications in various hypothetical scenarios. These examples include a range of token types, including native tokens, staking services, NFTs, tokenised securities and other common token types. The consultation paper also considers introducing additional examples including on wrapped tokens and ‘payment stablecoins.’
Interestingly, the worked examples (and the consultation paper) suggest that ASIC will focus not only on whether the digital asset itself is a financial product, but also on whether the overall arrangement and associated services is a financial product. This is a somewhat different approach than that taken by the court in ASIC v BPS Financial Pty Ltd [2024] FCA 457, where the court focused on the relevant token and wallet functionality rather than broader services.
Transition
The consultation paper states that ASIC is considering implementing transitional arrangements in the form of a conditional, class no-action position for digital asset providers who meet certain conditions. For example, for entities which will require an AFSL under the new guidance, they will have time to apply and could continue to operate while that application is pending. ASIC has indicated that this would not apply to crypto lending/earn products and derivatives referencing digital assets, except for wrapped tokens.
ASIC has not yet given guidance about any changes which may occur, or need to occur, to the application process for AMLs.
Links with Proposed Law Reforms
The proposed updates to INFO 225 are occurring against the backdrop of the Government’s upcoming reforms in the space, in particular the additional licensing requirements for crypto service providers (which we have previously discussed here) and licensing requirements for payment service providers (which will include payment stablecoins and which we have previously discussed here). It is not yet clear how these parallel reforms will interact.
The consultation paper closes for comments on 28 February 2025 and it is anticipated that the updated INFO 225 will be released in the second quarter of next year.