Hamilton Locke has prepared a submission on ASIC’s Consultation Paper 381: Updates to INFO 225: Digital Assets. ASIC has sought feedback on its updated guidance in Draft INFO Sheet 225 which seeks to provide the digital assets industry with further clarity on ASIC’s views on the regulatory perimeter of digital assets under the existing financial services regime.
Our key recommendations
We made several recommendations in our submission to ASIC and set out what we considered to be the key issues and challenges in the proposed updated guidance of INFO Sheet 225.
Our recommendations include:
- Broadening the no-action relief.
- Alternative approaches to the qualifications and experience requirements for responsible managers to enable digital assets’ businesses to source responsible managers.
- Ensuring the guidance is consistent with recent case law impacting the industry, including the Qoin case, in respect to what the relevant “facility” is.
- Clearer guidance on what is a facility for making a financial investment, including aligning it with previous case law on when a third party generates a return for an investor versus when the investor generates it for themselves.
- Clarifying that stablecoins should not be characterised as non-cash payment facilities, though the wider facility within which a stablecoin operates may be a non-cash payment facility.
- Clarifying that a financial product must always have a person who is the “issuer” and that anything that does not have an issuer cannot be a financial product as defined.
- Including further examples of the common structures used for stablecoins in the market.
- Including further examples for bullion-backed digital assets for bailments and derivatives.
- A recommendation that ASIC reconsider its position on wrapped tokens as the standard wrapping arrangement does not meet the definition of a derivative.
- A baseline tier 3 model to capture native digital asset markets.
- Guidance on the different types of wallets and clarity on what ASIC constitutes as control of a private key in the context of when a wallet is custodial vs non-custodial.
- Marked up changes to Example 13 in Draft INFO Sheet 225.
- Recommendations on proposed relief from the client money rules due to the debanking problem.
- Suggested changes to RG166 to cater to digital assets.
- Possible solutions for the insurance problem faced by the digital assets sector.
Overall, we commend ASIC’s efforts in seeking to provide transparent guidance to industry on the regulatory perimeter. Regulatory clarity is critical for digital assets businesses to continue to operate, grow and thrive in the Australian market. However, there is still significant work to be done.
Read more in our full submission.
***
Hamilton Locke’s Funds and Financial Services team are technical specialists who have a broad and deep understanding of payments regulation, together with other financial services regulations, which we use to provide practical solutions for a range of sectors, including credit, payments, funds, wealth management, crypto and general insurance.
We are technical and industry-focused specialists that have a broad and deep understanding of the Australian regulatory environment and the impacts that it has on our client’s products and service offerings. Our financial services expertise is market-leading, and we use our industry knowledge and expertise to deliver practical, compliant, and innovative solutions for our clients.
For more information, please contact Jaime Lumsden, Michele Levine, Charmian Holmes or Nicholas Pavouris.
