ASIC Chair Joe Longo outlined ASIC's stance in relation to cryptocurrency in a recent interview with Sky News:
...people think crypto is not regulated. It is regulated. It may not be completely regulated, which is why we have law reform coming. So part of ASIC's [regulatory] strategy is to test the regulatory perimeter.
Mr Longo’s comments follow a number of ASIC actions in recent months targeting crypto-related offerings, including its decision to appeal the Federal Court’s judgment finding that Finder Wallet’s Finder Earn product was not a debenture. In his interview with Sky News, Mr Longo reiterated ASIC’s view that the product is a debenture and ASIC’s desire to send a strong message that it will take enforcement action where it believes that cryptocurrency related offerings are regulated.
When asked to elaborate on ASIC's enforcement strategy, Mr Longo commented:
My job is to administer the law. A lot of crypto-related investment activity is subject to current regulation. If people aren't complying with the law at the moment, we will take action.
There are a number of matters we are currently investigating.
Turning to global regulatory developments, Mr Longo stated:
...what is interesting about what is happening internationally is that each jurisdiction is taking a slightly different approach. So the Americans, for example...it is all about whether [cryptocurrency] is a security or not.
The [US regulatory environment] is very different to Australia, [as] we have a regime around financial products and services.
If we think [a business offers] a financial product or service, we will take action.
Every jurisdiction has a different approach, but we're all focused on consumer protection.
Mr Longo accepted that there are limits to the regulatory perimeter and that greater clarity is required. In response to the interviewer addressing the lack of specific legislation and regulatory guidance regarding crypto-asset activities, Mr Longo stated:
We are closely working with government and treasury to come up with a regulatory framework which is more fit for purpose...the key point is [crypto] is not entirely unregulated at the moment. If it is a financial product or service, [ASIC] will be there.
Pressed on the timeline for much anticipated legislative reforms, Mr Longo emphasised that there was still a long road ahead, indicating that legislation could slip into next year or even beyond the next election:
At the moment we are still in the consultation phase. The draft legislation hasn't been exposed yet. It is certainly a government priority and we are doing everything we can to work with government and treasury to get progress there. The government has a lot on its plate.
Mr Longo concluded by reiterating his previous comments cautioning investors from investing in assets which they don’t understand.
As crypto-asset markets ramp up again, it looks like the Australian crypto industry is set for more regulatory stick than carrot in the near term. The legislative momentum which seemed to be gathering pace in 2022 following a number of high profile collapses has given way to a range of other priorities. This will disappoint many industry advocates who have called for clear rules to weed out “bad actors” and establish common rules for the industry.
While ASIC has long argued for greater consumer protections in relation to crypto-assets, the very absence of regulatory reform risks leaving consumers exposed in the event of future collapses. There is an urgent need to press on with establishing legislation to protect consumers and harness the benefits of blockchain technology, or risk driving innovators and consumers offshore as legislative efforts overseas continue to gather pace.
Written by Michael Bacina, Steven Pettigrove and Luke Higgins