ASIC releases much anticipated consultation paper to update Information Sheet 225 on crypto-assets
ASIC has released consultation Paper 381 Updates to INFO 225:Digital assets: Financial products and services which seeks feedback on, what is in substance, a complete overhaul of the existing Information Sheet 225 Crypto-assets.
Interplay with proposed regulation of digital asset platforms
In October last year, Treasury released a consultation paper proposing the regulation of entities providing access to digital assets and holding them for Australians and Australian businesses. The proposal paper states:
‘… the proposed framework does not displace the existing financial services laws. This means it will still be necessary to distinguish between entitlements and arrangements that are financial products and those that are not.’
Thus, clarifying what constitutes a financial product under current financial services laws will remain essential even with these reforms. ASIC says the proposed updates to INFO 225 complement the Government’s proposed reforms.
Digital assets as financial products – worked examples
ASIC’s position is that many digital assets are financial products under the current law, problematically, without specifying which digital assets. The result of this is that anyone who advises on or deals in these financial products requires an AFSL. However, the draft update to Info Sheet 225 includes worked examples of possible financial products, each of which is set out in the table below.
Type of token[1] | Type of financial product |
|---|---|
Exchange token Where funds raised will be used to develop the exchange and the token price changes based on perceived success of the exchange. | Facility for making a financial investment |
Staking services Aggregation of customer digital assets to stake. Company takes a fee for the services. | Facility for making a financial investment or a managed investment scheme |
In game NFTs Sold or received and tradeable on secondary markets. No representation in white paper or marketing materials that the contribution used to buy the NFTs will be used to generate a financial return, or other benefit (other than the utility of playing the game) or that the NFTs should be bought because of an expectation that the prices will increase. | Not a financial product |
| Yield bearing stablecoins | Managed investment scheme |
Gold linked tokens Gold and gold-related futures and options are acquired by the issuer and held on trust. | Managed investment scheme |
Membership tokens Giving members access to events and discounts and no financial benefits. | Not a financial product |
Presale of services token Tradable and redeemable for services. | Not a financial product |
Fundraising for new blockchain Initial ’seed funding’ token exchanged for ongoing use tokens. | Initial seed funding tokens – managed investment schemes Ongoing use tokens – managed investment scheme if element of MIS met as compared to generation of ongoing use token through contributing effort and work to process transactions and secure the network |
Meme coin issuer Proceed not used in a business and no right given to holders. | Not a financial product |
| Tokenised concert ticket | Not a financial product |
| Tokenised bonds | Debenture/security |
| CFD over digital assets | Derivative |
Digital asset wallet and own stablecoin Allows a client to instruct issuer to transfer their token to another address or digital asset wallet issued by the issuer. The service can also be used to transfer the token to any other address or digital asset wallet that accepts these tokens. Issuer markets this service as a convenient way for its clients to make payments to third parties. | Non-cash payment facility |
Transitional no action position
ASIC is considering a class no-action position for digital asset businesses that are applying for an AFSL, Australian market licence or clearing and settlement (CS) facility licence. ASIC proposes that it would have the following scope and conditions:
- it would only apply to:
- financial services in relation to digital assets that are financial products;
- to persons that had commenced operations in Australia before 4 December;
- for AFSL applications, it would apply from the time a person lodges a licence application or variation application (that has not been rejected as incomplete or deficient in any material respect) to cover their digital asset products and services, provided they lodge the application no later than six months from the date of ASIC’s updated INFO 225 is published;
- for an Australian market licence or a CS facility licence, it would apply from the time a person informs ASIC in writing of its intention to lodge a licence application or variation application to cover their digital asset products, provided they inform ASIC no later than six months from the date the updated INFO 225 is published, and provided the licence application or variation application is lodged within 12 months of the date the person informed ASIC in writing of its intention;
- it would last until the licence application has been either withdrawn or decided upon (ie a licence has been granted or refused);
- the person would have to be a member of the Australian Financial Complaints Authority (AFCA);
- if the person is not an Australian company or resident, it would have to register as a foreign company (including appointing a local agent under s601CF of the Corporations Act);
- the no-action position would not be available in relation to crypto lending/earn products and derivatives referencing digital assets (other than certain wrapped tokens); and
- ASIC may notify a person in writing that the no-action position does not apply to them.
What’s next
ASIC is seeking feedback on the proposed updated INFO 225 and the issues raised in CP 381 by 5pm on 28 February 2025. ASIC intends to publish a final version of the updated INFO 225 in mid-2025, after considering feedback received through the consultation process.
Please contact John Bassilios if you require assistance with making a submission on the consultation paper or commencing your AFSL application.
[1] The draft update to Info Sheet 225 includes greater detail on the feature of the token.
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