The Australian Securities and Investments Commission (ASIC) has put the country’s ‘digital asset’ sector on notice of tough new regulations ahead
Speaking at an industry event last week, ASIC commissioner, Alan Kirkland, said the regulator had “already begun thinking about implementation” of looming reforms set to bring crypto-asset platforms under the financial services licensing regime and provide greater oversight of payments providers.
Licensing of crypto platforms is “likely going to mean significant uplift in the operations of a number of industry participants”, Kirkland said.
“The proposal is that platform providers will need to comply with the general obligations for licensees – including operating efficiently, honestly and fairly – alongside other obligations within the Corporations Act,” he said.
“Some platform providers will face additional obligations, where they undertake what Treasury has called a ‘financialised function’. For example, if you provide the token trading function, this could mean aspects of the markets regime may apply.”
NZ has yet to introduce crypto-specific regulations but the government tabled a parliamentary report last month recommending a series of measures. In response the government says it will “proactively consider” the report findings.
However, the Australian moves may trigger a response on this side of the Tasman given the global regulatory initiative to rein-in the unruly digital asset sector.
Kirkland said the proposals in Australia were in line with the International Organization of Securities Commissions (IOSCO) crypto recommendations published last November that “place a strong emphasis on addressing governance and conflicts of interest, abusive behaviours, sales and distribution practices, and custody” at a global level.
“As a member of IOSCO and an active participant in its Fintech Task Force, ASIC supports IOSCO’s objective of same activity, same risk, same regulatory outcome,” he said.
To date, the FMA has relied on policing the crypto sector on a like-for-like functional basis, requiring local providers to be registered and comply with anti-money laundering, know-your-client rules, for example.
“If you want to trade/transact cryptocurrencies or cryptoassets, then use a New Zealand based trading platform as this offers a minimum level of protection,” the FMA notes.
“New Zealand based trading platforms must be registered on the financial service providers register (FSPR) and belong to a dispute resolution scheme.”
Other than a few bankruptcy cases and the recent Serious Fraud Office investigation into the collapsed Dasset exchange, the NZ crypto sector has faced few legal challenges.
ASIC, meanwhile, has racked up a couple of wins (and a loss) against crypto operators this year – notably a favourable finding in the Block Earner case that NZ legal firm, MinterEllisonRuddWatts, says resonates here.
“For New Zealand market participants, the decision serves as a timely reminder that the existing financial services regime might be applicable to digital asset-related products and services even if the digital assets themselves have not been treated as financial products,” the MinterEllisonRuddWatts note says. “It remains to be seen if the FMA will express interest in testing the regulatory boundaries in this area, especially considering ASIC’s recent success. Until such time the New Zealand government establishes a clear regulatory framework for digital assets and related services, New Zealand market participants should carefully consider whether their products/services are subject to existing regulatory regimes.”
ASIC has two more crypto cases on the boil, Kirkland said, as well as a potential appeal against a decision earlier this month in favour of Finder. An Australian court ruled a Finder crypto lending product did not fall under the definition of a debenture, as alleged by the regulator.
He said ASIC was also contemplating the potential impact of asset ‘tokenisation’ – including so-called stablecoins – on the broader financial sector.
The recent surge in bitcoin, sparked by the launch of spot exchange-traded fund (ETF) products in the US, and other crypto markets has likely rekindled regulatory concerns.
New Zealanders can access crypto markets through various channels including direct (on local- or offshore-based platforms), the new US ETFs or in a couple of portfolio investment entity (PIE) products offered by Vault Digital Funds and Kōura (in its KiwiSaver scheme).
Despite the recent price spike both crypto PIEs have seen limited demand.
Vault founder, Vinnie Gardiner, said interest was growing with the fund now at $12.5 million: the Kōura fund reported $2.7 million under management at the end of last year.
Possibly, the US ETF palaver is diverting attention from local avenues. It is understood, too, that one prominent crypto-trading platform is on the block.
