The Australian Securities and Investments Commission (ASIC) has announced plans to advance the country’s crypto and blockchain industry, paying close attention to policy, regulation, and innovation. Speaking in a forum as part of the Blockchain APAC’s Policy Week, ASIC Commissioner Alan Kirkland addressed multiple issues, all geared toward balancing financial innovation with consumer protection.
Kirkland’s speech touched on several points, including the ASIC’s approach to innovation. He mentioned the “regulatory trilemma” – an idea suggesting that adequate supervision of financial innovation can “at best” satisfy two of three main objectives: consumer protection, market integrity, and the encouragement of financial innovation.
Regulatory Support for Financial Innovation
The effect of ASIC’s efforts to encourage financial innovation would likely spread to other sectors. For example, regulatory support for crypto could be great for the online casino industry at establishments that support crypto. These platforms take advantage of the speed and security of the blockchain to offer users exciting bonuses and promotions while attracting new gamblers and also retaining existing ones. Live casinos, which have soared in popularity in 2024, can especially make the most of the speed and security of blockchain, as games and bets take place in real-time, meaning fast and responsive payments and streaming are key. Greater regulation could also help those who rely on crypto for payment for freelance work done for overseas companies – where it offers a much cheaper and faster alternative to international bank transfers.
Kirkland says the three main objectives might be “seemingly competing factors.” However, he believes that the aim of good regulation is to find a balance between all three.
The Commissioner explained that regulation and enforcement are essential to build trust because any system with inadequate oversight is likely unreliable. Such systems eventually fail because investors do not get the protection they need.
Kirkland boasts of the ASIC’s Innovation Hub, a platform that has helped more than 900 entities navigate the country’s regulatory landscape since 2015. In addition to this assistance, the Innovation Hub puts some entities through a government-administered Enhanced Regulatory Sandbox. In addition, these start-up and scale-up firms can take advantage of several forums hosted by the ASIC, where stakeholders can meet with government representatives to discuss regulations and trends.
Tokenization of Financial Products
In his speech, Kirkland highlighted the role of tokenization in financial innovation. He notes that the ASIC has received increased requests from entities looking to tokenize financial products and several real-world assets. Some of the efforts at tokenization include partnering with the Reserve Bank of Australia (RBA) on a Central Bank Digital Currency (CBDC) trial. A few banks are also working on stablecoins.
Furthermore, the ASIC intends to support innovation by making a few determinations. These include how tokenization fits in the current regime, how much guidance or reform is required, specific opportunities and risks, as well as fixing cross-border issues.
Kirkland highlights a few updates regarding regulatory reforms. For instance, last year, the government proposed a new crypto regulatory blueprint that would subsume digital assets under the existing financial services framework. Among other specifics, crypto firms would have to apply for and receive an Australian Financial Services Licence from the ASIC. Another proposed regulatory reform is the regulation of payment service providers, which extends to stablecoins.
According to Kirkland, the government aims to support market innovation while protecting investors. The ASIC Commissioner said:
“In short, our desired outcome is a clear set of rules that maintain market integrity and mitigate the risks to consumers and investors – backed by mechanisms that promote compliance with these rules and enable us to enforce them effectively.”
However, the public must note that the financial rules and regulations may be applied differently depending on the service provider and what functions they offer to customers. Kirkland said that these firms must comply with licence requirements, along with several other obligations in the Corporations Act. However, some firms would have added responsibilities, such that some aspects of the law may apply, depending on specific functions. Nevertheless, Kirkland encouraged all service providers to ensure they operate within the law by procuring the proper licences and conducting business lawfully.
ASIC Will Pick and Choose Enforcement Actions
Finally, Kirkland discussed enforcement. According to him, the ASIC will use a “risk-based approach” instead of pursuing every case of misconduct. He explained that the Commission will pursue cases considered the most harmful or likely to send a strong message to other defaulters. However, Kirkland warns that no one should consider any enforcement reluctance as an endorsement. The Commission has already begun prosecuting defaulters in the sector, securing a travel restraint order on an Exec of a defunct crypto firm.
