Australia's ASIC Proposes Stricter Oversight for Stablecoins and Wrapped Tokens

Australia's financial regulator, the Australian Securities and Investments Commission (ASIC), has introduced plans to enhance oversight of the cryptocurrency market, aiming to strengthen consumer protection and close regulatory gaps.

Consultation Paper 381: Addressing Regulatory Gaps

On December 4, ASIC unveiled Consultation Paper 381, outlining a comprehensive framework to regulate cryptocurrencies, including stablecoins and wrapped tokens. The paper proposes measures to clarify licensing requirements and align the crypto market with existing financial laws.

ASIC Commissioner Alan Kirkland emphasized the importance of a “well-regulated financial system” that fosters responsible innovation while safeguarding consumers.

“Many digital assets and related products are financial products under the current law. Stakeholders have been calling for greater clarity, and in response, we are releasing our draft updated guidance,” Kirkland stated.

Key Features of the Proposal

• Practical Examples: ASIC aims to include 13 examples illustrating how existing financial product definitions apply to digital assets and related products.

• Regulatory Relief and Transition: Suggestions include potential regulatory relief measures and transitional approaches for businesses adapting to the updated framework.

• "No Action" Position: Firms applying for or modifying licenses may benefit from a temporary “no action” stance, allowing operations to continue during the licensing process.

Public Consultation and Timeline

Public feedback on the proposed framework is open until February 28, 2025. ASIC plans to finalize the updated guidance by mid-2025.

Crypto Taxation Review Underway

In parallel, Australia’s Treasury is reviewing crypto taxation policies with input from the Organization for Economic Cooperation and Development (OECD). Two potential approaches are under consideration:

1. Adopting the OECD’s Crypto Asset Reporting Framework (CARF), which aims to enhance tax transparency by collecting data on crypto transactions over $50,000.

2.Customizing CARF for domestic requirements.

The Treasury’s move aligns with global efforts to monitor cryptocurrency transactions and ensure compliance with tax regulations.

Implications for the Industry

ASIC’s proposed measures reflect a growing commitment to address regulatory challenges in the rapidly evolving cryptocurrency space. As Australia tightens oversight, businesses and consumers can expect a more structured and transparent environment for digital asset transactions.