If one accepts ASIC’s premise that a universal definition of a crypto-asset does not exist, and the suggestion that businesses with an association with crypto-assets require an Australian Finance Services Licence (AFSL), how can a business confirm an association exists when the asset itself cannot be universally defined?
The thirty-two firms consulted by ASIC, also raised concerns as to the confusion and regulatory burdens ASIC may create and suggested crypto-assets were out of ASIC’s asset class domain. Concerns over placing additional regulatory burdens to no benefit and being at odds with other countries could also delay consumer protections and add costs of additional regulator burden that would be paid by regular retail consumers and by crypto businesses. This may discourage crypto businesses from engaging the Australian market, pushing their operations and jobs offshore.
The confusion does not end there, especially when considering how various crypto businesses might require regulatory authorisation to operate. For example, if contributions are pooled or used in a common enterprise to produce financial benefits or interests in an asset, these falls into the definition of a retail managed investment scheme and an AFSL is required. The investible asset class is now irrelevant, as it is the action of arrangement and dealing which is key. However, this approach is contradicted, if companies are considered which offer online trading in crypto-assets, via a non-dealing desk operation (not providing liquidity for transactions made by clients on their trading platform, as appose to a market making operation). These businesses are not required to hold an ASFL to operate, but should they then offer shares, spread betting, contracts for difference, commodities, forex, or indices, then they would, and therefore the investible asset class is now relevant.
The regulatory framework is tasked with protecting investors and preserving financial stability. It should also allow innovation and not get in the way of progress, but this is becoming difficult with crypto businesses confused as to how to they can remain regulatory compliant, in such an ambiguous and rapidly shifting regulatory landscape, supervised by regulators with mercurial temperaments.