Rhys Bollen, a key figure overseeing financial technologies at the Australian Securities and Investments Commission (ASIC), proposes a paradigm shift in how cryptocurrency regulation should be approached. During his speech at the Melbourne Money & Finance Conference, he argued for a focus on the economic functions of crypto-assets rather than their technological aspects. This perspective, he suggests, would better align with the public interest.
How Do Blockchain Assets Resemble Traditional Finance?
Bollen drew parallels between the roles played by blockchain-based assets and conventional financial products. While the technologies involved in transaction processing and record-keeping have advanced, the key activities, such as payments and risk management, remain consistent. The primary distinction, Bollen noted, lies in technological infrastructure, not in the fundamental financial functions these assets serve.
He advocated for regulatory policies to emphasize the economic roles of digital assets over their technical characteristics. Tokens that act as securities, for instance, should fall under capital markets regulations, while transaction-focused stablecoins should be included under payment services laws. Bollen stressed categorizing assets by their function to achieve regulatory clarity, rather than being dazzled by blockchain’s novelty.
“What role does a digital asset play within the financial system?” Bollen emphasized as the critical question for regulators.
In addition, he reminded the audience that the financial industry has historically adapted to technological advances without compromising key principles like consumer protection and financial stability.
Can Existing Legal Frameworks Adapt to Digital Assets?
Australia’s approach involves integrating digital assets into existing legal structures. The anticipated Digital Assets Framework Bill aims to update current financial laws instead of creating separate regulations for cryptocurrencies. This initiative seeks to instill confidence and ensure stability by incorporating digital assets into established legal frameworks.
The bill plans to introduce modifications to the Corporations Act 2001 to extend regulation to digital asset platforms, embedding them into the broader financial ecosystem seamlessly.
ASIC’s Guidance 225 specifies that digital assets will be identified based on their functions, aligning them with existing legal categories like securities or payment instruments. This function-oriented focus seeks to maintain consumer protection and market standards without suppressing innovation.
Under new guidance, stablecoin issuers will mostly need licenses since these tokens often fit the categories of non-cash payment instruments or managed investment schemes. Transitional compliance measures have been announced to support certain stablecoin providers amid new regulatory transitions.
Bollen identified key risks associated with crypto intermediaries like trading and custodial platforms, rather than the technology itself. Such risks arise from these entities’ handling of client assets and operational transparency.
