Australian Senate Crypto Report - Recommendation 3: digital asset characterisation
The Senate Select Committee Report into Australia as a Technology and Financial Centre's Final Report considered ways in which Australia can characterise and define digital assets through its third recommendation clearer regulations, policy, definitions and characterisations of various digital assets:
The committee recommends that the Australian Government, through Treasury and with input from other relevant regulators and experts, conduct a token mapping exercise to determine the best way to characterise the various types of digital asset tokens in Australia.
The committee decided that an adequate understanding of the various digital assets available in the market is necessary so as to determine what regulatory requirements should apply to different types of products. The classification of tokens has long been a grey area.
Domestically, very few digital assets would appear to meet the legislative definition of a financial product under the Corporations Act a fact noted by the Committee; however, the Australian Securities & Investments Commission (ASIC) advised that an Australian Financial Services Licence (AFSL) will be required by any issuer of a digital asset which is a financial product.
This has created uncertainty of at which point a digital asset becomes a financial product and is thus under ASICs jurisdiction. The committee sought to clarify this by recommending a token mapping exercise to assist in developing a regulatory framework before any definitions are adopted.
A broader, fit for purpose framework was suggested by Blockchain Australia's submission to the Committee as a result of overseas jurisdiction. In conjunction with this, a multi-agency working taxonomy was recommended by the Digital Law Association in their submission.
The Final Report noted a variety of inconsistent and in some cases problematic classifications of digital assets overseas with Canadian government considering cryptocurrencies 'digital currencies' while in Europe the term 'crypto-asset' is used as an umbrella term for cryptos, CBDCs, stablecoins and different kinds of tokens.
The term 'crypto-asset' is also used in Singapore, which does not adequately differentiate between asset classes or tokens, meaning there is concern that certain business using NFT's could unintentionally be caught under the financial product regime.
Clear regulatory guidance is critical to encouraging investment and jobs in the digital asset space and the findings from a token mapping exercise is a good place to start.