Australia's Approach to Crypto Regulation Focuses on Economic Substance

Blockchain and cryptocurrency technologies should not be treated as separate asset classes when crafting legislation, according to the fintech chief of Australia's securities regulator. According to Cointelegraph, Rhys Bollen, head of fintech at the Australian Securities and Investments Commission (ASIC), emphasized that crypto should be regulated based on its economic substance rather than its technological form. Speaking at the Melbourne Money & Finance Conference, Bollen argued that tokenized securities should be governed by securities laws, while stablecoins should fall under payment services legislation. He also noted that other aspects of cryptocurrency might be subject to consumer protection laws. Bollen's stance contrasts with crypto-specific regulatory frameworks in other regions, such as the CLARITY Act in the United States and the Markets in Crypto-Assets Regulation in Europe. He highlighted that the core financial functions of capital allocation, payments, and risk management have evolved alongside technological advancements. Distributed ledger technologies, like blockchain, should not be treated differently, he asserted. Bollen stated that digital assets largely represent new technological instances of longstanding financial activities, with changes in issuance, transfer, and record-keeping mechanisms not altering the underlying economic functions. He added that regulatory systems have historically adapted to technological changes without abandoning foundational principles like consumer protection, market integrity, and systemic stability. Australia is already beginning to adopt this approach, with the Digital Asset Framework bill aiming to amend parts of the Corporations Act rather than creating a comprehensive crypto bill. Bollen explained that the bill does not discard the existing financial services framework but introduces tailored amendments to integrate digital asset platforms into the established regulatory architecture. ASIC's guidance, as outlined in Information Sheet 225, rejects the notion that digital assets constitute a separate asset class for regulatory purposes. Instead, it confirms that a digital asset may fall within the regulatory perimeter if it functions as a security, derivative, managed investment scheme interest, or non-cash payment facility. Bollen emphasized that focusing on economic characteristics rather than technological labels would enable regulators to provide clearer rules to market participants while reducing opportunities for regulatory arbitrage. Bollen also noted that ASIC Information Sheet 225 focuses on regulating intermediaries rather than tokens, highlighting that most consumer harm in the digital asset industry has resulted from the conduct of crypto platforms offering custody, trading, lending, or yield services. He acknowledged that classification issues might arise with decentralized products or services, but legal analysis should focus on practical control and benefit rather than formal claims of decentralization. Bollen concluded that regulatory obligations should apply where identifiable parties exercise influence over protocol design, governance, or economic outcomes.