ASIC has released its highly anticipated consultation paper on substantial proposed updates to Information Sheet 225 Crypto-assets (INFO 225).
Consultation Paper 381 Updates to INFO 225: Digital assets: Financial products and services (CP 381) is the first consultation of its kind from ASIC with respect to digital assets guidance and reflects an important opportunity for industry to provide direct feedback on ASIC’s interpretation of common business models, token offerings and structures against Australia’s financial services laws.
CP 381 is intended to complement the Government’s proposed reform bringing digital asset intermediaries within the Australian financial services licence (AFSL) regime. ASIC notes that its updates to INFO 225 may need to be updated in future to reflect changes to proposed licensing of payment services providers and payment stablecoins.
Worked examples
Most notable in the updated INFO 225 is ASIC’s inclusion of 13 worked examples demonstrating ASIC’s view of when digital assets are likely to constitute regulated financial products. These are summarised as follows.
Financial product | No | Overview of ASIC example | |
Facility through which a person makes a financial investment | 1 | Exchange token: A digital asset issued by a digital asset exchange that is marketed as a way to contribute to, support and potentially obtain a return or benefit by ‘investing’ in the project. The exchange may be obligated to buy back the token. The token’s price is impacted by the success of, and sentiment towards, the exchange. ASIC considers this is likely to be a facility for making a financial investment. | |
2 | Native token staking service: A digital asset exchange offers customers the ability to natively stake digital assets to support blockchain transaction verification subject to certain conditions like a minimum staking balance or lock up period. The service is marketed as a way of earning a return. The exchange takes a fee for providing the service. ASIC considers this is likely to be a facility for making a financial investment. | ||
3 | In game NFT: A gaming company uses public blockchain to record ownership of in game assets that can be purchased or earned through play. The assets are NFTs that can be traded or sold. The company makes no representations around any returns, benefits or value of the NFTs. ASIC considers this is unlikely to be a facility for making a financial investment. | ||
Interests in a managed investment scheme | 4 | Yield bearing stablecoin: A company issues a digital asset that is marketed as a yield bearing stablecoin. Holders contribute funds for the company to purchase bank deposits and government securities. Holders earn yield as a result of the returns on these investments. The tokens have the benefit of being stable in value and being able to be used to make payments ASIC considers this is likely to be a managed investment scheme. | |
5 | Gold referenced token: A company issues a gold-linked digital asset and uses the funds to purchase spot gold and other gold-related investments and holds them in trust. Each asset represents an interest in the trust holding the investments. ASIC considers this is likely to be a managed investment scheme. | ||
6 | Membership NFT: A company issues an NFT representing membership for a bookstore that gives holders discounts and access to member events. ASIC considers this is unlikely to be a managed investment scheme. | ||
7 | Token representing a claim for prepaid services: A company issues digital assets to pre-sell services. The tokens are tradeable, there is a fixed supply, and the proceeds of the token sale are to grow the business. Each token is redeemable for a specific amount of future service. ASIC considers this is unlikely to be a managed investment scheme. | ||
8 | Fundraising for a new blockchain: A company issues digital assets to raise funds to establish a new blockchain. Upon the new blockchain being operational, the company cancels the digital assets and replaces them with an equivalent number of new digital assets. The second set of digital assets is available for sale to the general public. ASIC consider the original sale is likely to be a managed investment scheme. Whether the second set of digital assets is a managed investment scheme depends on the circumstances. | ||
Securities (including debentures) | 9 | Meme coin: A private individual releases a meme coin. The money collected is not used for commercial purposes and the coin does not provide holders with any rights. It is not associated with any chain and isn’t promoted as a payment method. ASIC considers this is unlikely to be a security. | |
10 | Tokenised concert ticket: A company issues a tokenised concert ticket that is transferrable but does not have any additional entitlements. ASIC considers this is unlikely to be a security. | ||
11 | Tokenised security: A company tokenises corporate bonds that have typical features of a traditional bond. The bonds are not fractionalised. ASIC considers this is likely to be a debenture and therefore a security. | ||
Derivatives | 12 | Contract for difference over a digital asset: A company offers contracts that allow customers to speculate on the change in value of an underlying digital asset. ASIC considers this is likely to be a derivative. | |
Non cash payment facility | 13 | Digital asset wallet: A company offers a non-custodial wallet and issues a proprietary stablecoin. Customers can use their wallets to make payments using the stablecoin and the company markets the wallet as a convenient payment solution. ASIC considers this is likely to be a non cash payment facility. |
ASIC has also requested feedback on whether it will develop additional examples on the following assets.
Stablecoins: ASIC’s view is that stablecoins including the following features may be a non cash payment facility – a token is marketed as a non-interest bearing stablecoin that is 1:1 with Australian dollars, the relevant company will redeem or buy back stablecoins for fiat at par value, money received is recorded as an asset and money repaid to stablecoin holders is recorded as a liability of the relevant company and the company holds money from stablecoin holders in a bank account or uses it to purchase low risk investments.
Wrapped tokens: ASIC’s view is that wrapped tokens that include the following features are likely to constitute a derivative – a company offers a product enabling a token to be represented on another blockchain with that representation having added functionality and lower fees, the price of the wrapped token moves by reference to the original token (but is not identical) and the holder of the wrapped token can redeem it for the native token.
As well as considering the rights and benefits attached to a digital asset or arrangements around a digital asset, it is clear that providers will need to consider their customer messaging and marketing.
AFSL obligations
CP 381 sets out additional considerations for consultation relating to ASIC’s views on relevant obligations, authorisations and application materials. Generally, ASIC does not consider that extensive updates are required.
CP 381 states that the updated INFO 225 is intended to clarify ASIC’s interpretation of existing financial services laws without imposing new regulatory obligations or requirements. ASIC’s expectation is that existing AFSL processes, guidance and conditions will remain applicable to digital asset financial services providers without substantive updates. That is, digital asset financial services providers will still be subject to general obligations (eg, providing financial services efficiently, honestly and fairly), conduct and disclosure obligations.
ASIC has proposed expanding custody standard requirements to digital asset financial services providers that provide custodial and depository services. ASIC is also considering extending the ability to omnibus accounts for certain digital assets that are financial products (for example, securities, derivatives and deposit-taking facilities).
ASIC has indicated that it does not consider that digital asset specific authorisations are required for digital asset AFSL applications except for the following:
Derivatives: ASIC proposes to distinguish derivatives that involve leverage or margin (eg, contracts for difference, options and perpetual futures) and those that do not. The reasoning for this is the additional risk associated with leverage and margin.
Facility through which a person makes a financial investment: Rather than a ‘miscellaneous financial facility’, ASIC is proposing to include ‘facility for making a financial investment’ in line with ASIC’s worked examples for that financial product.
ASIC does not propose updating AFSL application proof requirements (see Regulatory Guides 1, 2 and 3) but noted it may issue further requisitions during the AFSL application process. These may eventually form part of ASIC’s standard requisitions and may cover topics such as digital asset types, cyber security, asset holding arrangements, organisational competence and onboarding requirements.
ASIC is considering publishing sample questions and further topics.
Class no action position
ASIC has proposed a class no action position for digital asset financial services providers, subject to certain conditions:
It would only apply to financial services in relation to digital assets that are financial products and to persons commencing operations in Australia prior to the date of the new INFO 225
For AFSL applications or variations, it would apply from the time of accepted lodgement provided this occurs within six months of the date of the new INFO 225
For an Australian market licence or clearing and settling facility application or variation, it would apply from the applicant notifying ASIC in writing of an intention to make an application or variation (which must occur within six months of the date of the new INFO 225) and lodgement must occur within 12 months of the date of the new INFO 225
It would last until the application has been withdrawn, granted or refused
The provider must be a member of the Australian Financial Complaints Authority
If the provider is not an Australian company or resident, the provider must register as a foreign company (including local agent appointment)
ASIC is considering excluding crypto lending or earn type products and derivatives referencing digital assets
ASIC can notify a provider that the no action position does not apply to that provider.
The creation of the no action position recognises that providers will need time to transition and comply with the law. The no action position only applies to the licensing requirement and does not cover other obligations or breaches (eg, misconduct like false and misleading statements).
Next steps
ASIC is focused on understanding practical implications and transitional issues. Submissions are due 28 February 2025. ASIC expects to release its updated INFO 225 in Q2 2025.
Please contact us if you’d like to discuss the consultation, how it may impact your business, applying for an AFSL or making a submission.