The Australian government has published a Proposal Paper with details of its intended regulatory framework for entities providing access to digital assets and holding them for Australians. Background.

The proposed regulatory framework would apply to digital asset platforms that present similar risks to entities that operate in the traditional financial system. It proposes to leverage the Australian financial services framework to regulate digital asset platforms to ensure consistent oversight and safeguards for consumers.

It would not expand how those laws apply to digital assets directly.

It would require digital asset platforms that hold over a certain threshold of Australians’ assets ($1,500 for an individual; $5 million in aggregate) to obtain an Australian Financial Services Licence.

The Proposals use the following terms:

• a new financial product called a ‘digital asset facility’. It would be a facility for either: (i) holding digital assets; or (ii) holding assets ‘backing’ digital assets.
• Digital tokens are digital units or records that can be used to represent or refer to anything. Digital tokens include cryptocurrency tokens (like bitcoin) and non-fungible tokens (like for art and in game items).
• Digital assets are digital tokens and the entitlement they grant to their holder.
• A digital asset platform would be a ‘multilateral’ digital asset facility. This means it would be an asset-holding arrangement that allows customers to transact in their assets (without the assets leaving the safety of the facility).

All digital asset platforms will need to meet specific obligations that take into account the nature of the platforms, of tokens, and their risks. The specific obligations, unique to the digital assets industry, will include:
• standard form platform contracts
• minimum standards for holding tokens
• standards for custody software
• standards when transacting in tokens.

The proposal would also apply additional obligations to four specific activities involving non-financial products offered by digital asset platforms:
• Trading – the exchange of digital asset platform entitlements between account holders.
• Staking – the participation in validating transactions on a public network.
• Tokenisation – the creation and exchange of entitlements backed by tangible and intangible
assets.
• Fundraising – the sale of entitlements to fund the development of products and services.

More: Crypto-assets: The case for strong regulation and enforcement, Speech by ASIC Chair Joe Longo.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.