ASIC has pivoted and finally actioned the digital asset industry’s request for certainty and a safe transition path to regulation. This is particularly important for some of the most contested digital asset services, which ASIC considers are already being provided unlicensed by providers – stablecoins and wrapped tokens.
ASIC has done this by:
- Publishing a no action position for digital assets.
- Proposing class order relief for stablecoins and wrapped tokens.
But there’s a catch…
Background
For a few years now, it has been ASIC’s public position that many digital asset services are in fact regulated financial services being provided by businesses that do not hold the correct licences (or in many cases, a licence at all). The release of INFO Sheet 225 has clarified ASIC’s position on two significant digital asset issues that the industry has been grappling with: stablecoins and wrapped tokens.
ASIC’s view, in a nutshell, is that:
- Stablecoins (that do not provide any return or yield) are highly likely to be a non-cash payment facility.
- Wrapped tokens are derivatives.
This view creates significant licensing issues, particularly for digital asset exchanges, who are likely to be providing multiple financial services in respect of these products, including:
- Dealing in a non-cash payment facility.
- Making a market (for OTC trades).
- Operating a market (for an order book that matches trades).
- Issuing a derivative.
- Providing a custodial or depository service (by holding both types of tokens, which are financial products).
If this view is correct, the outworking of this is that many exchanges are currently breaching the law (and have been for many years) and need complex Australian financial services (AFS) licences, as well as, in some cases, markets licences to operate their businesses.
Importantly, in Treasury’s proposed reforms, the treatment of both of these things will be significantly different:
- The concept of a non-cash payment facility will be removed and stablecoins will now fall under a new financial product called a tokenised stored value facility. Under this product definition, the facility within which stablecoins can be redeemed will be regulated as the tokenised stored value facility, but the stablecoin (such as the token) itself will not be a financial product.
- Wrapped tokens will not be a derivative and will be exempt from financial services laws if certain conditions are met.
The combined effect of this is that exchanges need complex licences currently to comply with ASIC’s view, but in several years they will not. This puts exchanges in a difficult situation of needing to apply for licences that will, in some cases, take one to two years to obtain, only to no longer need the licence soon after. Compounding this is the significant cost and effort required to obtain that licence.
ASIC’s proposed relief apparently fixes this problem – or does it?
Proposed relief
In broad terms, ASIC proposes that distributors (such as digital asset exchanges), in relation to certain stablecoins and wrapped tokens, will not need to hold:
- a market licence
- a clearing and settlement facility licence
- an AFSL for:
- providing general advice on non-cash payment facilities
- dealing in a non-cash payment facilities
- issuing a derivative
- making a market for a non-cash payment facilities
- providing a custodial or depository service.
Generally speaking, an exchange can only access this relief if the issuer of the stablecoin or wrapped token holds the required AFS licence. This is reasonable for stablecoins, where the issuer will need an AFS licence with a non-cash payment facility authorisation now, and that will ultimately be transitioned to a tokenised stored value facility authorisation under the Treasury reforms. However, this is less reasonable for wrapped tokens, for which no AFS licence will be needed under the reforms.
For exchanges to access the relief for wrapped tokens, they are reliant on issuers obtaining derivatives licences that may be redundant in two years’ time (and which in our experience are likely to take at least 12 months to obtain).
If issuers don’t obtain an AFS licence (or until such time as they do obtain a licence), exchanges cannot rely on the proposed relief and will need to instead rely on ASIC’s no action position.
But wait… there’s another catch.
No action position
ASIC has published its no action alongside the final INFO Sheet 225. Broadly, ASIC will not take action against a person for:
- Not holding an AFS Licence for the provision of financial services in relation to digital assets that are financial products.
- Not holding an Australian market licence for operating a financial market only because one or more digital assets is a financial product.
- Not holding an Australian clearing and settlements facility licence for operating a clearing and settlement facility only because one or more digital assets is a financial product.
However, ASIC’s no action position is predicated on certain conditions being met, one of which is that the person must do one or all of the following (as relevant):
- Lodge an application with ASIC for an AFS Licence covering the service by 30 June 2026.
- Notify ASIC in writing by 30 June 2026 of their intention to apply for a market licence, attend a licensing pre-meeting with ASIC in relation to the proposed application, and lodge a market licence application within 12 months of the date ASIC was notified of the intention to apply.
- Notify ASIC in writing by 30 June 2026 of their intention to apply for a clearing and settlements facility licence, attend a licensing pre-meeting with ASIC in relation to the proposed application, and lodge a market licence application within 12 months of the date ASIC was notified of the intention to apply.
An exchange cannot obtain the benefit of the no action letter in relation to stablecoins and wrapped tokens unless it applies for licences – the same licences that it will not need if it later becomes able to rely on the proposed relief, nor which will be needed under the reforms Treasury has proposed.
Net effect
Exchanges cannot rely on the proposed relief unless issuers apply for a relevant AFS licence – which issuers of wrapped tokens may not do, because they will not need a derivatives licence under the proposed reforms.
Exchanges that cannot rely on the proposed relief (either because the issuer will not apply for a licence or has not yet done so), will need to rely on ASIC’s no action position in the interim – but cannot do so unless they themselves apply for one or more licences that they will not need under the proposed Treasury reforms.
Additionally, the no action position only applies to financial services provided after 29 October 2025. This means that exchanges will be exposed for any financial services provided in relation to stablecoins and wrapped tokens (as well as other products) prior to 29 October 2025. This lack of retroactivity engenders uncertainty, the very thing industry wants to avoid, and which ASIC is seeking to redress with the no action letter and class order relief. This may be an oversight, or the result of a mismatch between the no action letter and class order. Either way, this is a critical issue that needs to be considered and addressed.
Your voice
We are going to lodge a submission on the proposed class order relief that covers these points. Neither relief nor a no action position should be conditional upon obtaining a licence that is not expected to be needed under the reforms, especially when such a licence may not even be granted in time before the commencement of those reforms. This is a waste of the resources of both industry and ASIC alike.
Now is the time to raise your voice on this issue as well – the more submissions the better.
Reach out if you would like to discuss any of the points raised in this article and what it may mean for your business or how you can make a submission.
Details of ASIC’s proposed relief and how to make a submission can be found here.
Details of ASIC’s no action letter can be found here.
