Discussing RWA tokenization, stablecoins, and asset management from the perspective of Australian ASIC

Author: Aiying; Source: AiYing Compliance

Recently, a consultation document issued by the Australian Securities and Investments Commission (ASIC) has quietly appeared at the center of discussion in the field of digital finance. This document, titled "CP 381: Update on Financial Products and Services for Digital Assets", is not only a dialogue examining tradition and innovation, but also an open confrontation between regulatory authorities and technology pioneers on the path of global compliance and financial technology evolution. For the Web3 world, its significance is not limited to the evolution of policies, but also a hint for global digital asset practitioners on how to cope with future storms. Aiying uses a unique perspective to deeply interpret this document and explore its potential impact on RWA (real world assets), Web3 payments, asset management, stablecoins and other fields, aiming to provide insights for senior industry practitioners to meet new challenges and seize new opportunities.

1. Digital asset regulation: confusion in the old world and the birth of new rules

As early as 2017, ASIC first issued guidance on crypto assets, covering ICO (initial token offering) at the time. In the initial version of this guide, regulators tried to define the boundaries of this emerging field. However, over time, the world of digital assets has undergone tremendous changes - from a single token to tens of thousands of different categories of digital assets, the evolution of blockchain technology has promoted the tokenization of real-world assets (RWA), asset management methods have been reconstructed, and the concept of stablecoins has gradually become an important part of global payments. ASIC's INFO 225 is constantly updated based on this evolution, and in this 2024 update, we see that regulators have shifted their focus from a single cryptocurrency to a more systematic digital financial ecosystem.

Second, the core of the document - the definition of boundaries and the repositioning of compliance

The core of CP 381 is the re-update of the INFO 225 guidelines, which aims to clarify when digital assets become "financial products",, and must therefore comply with Australian financial regulations. This update provides an in-depth classification of various forms of digital assets - from stablecoins to tokenized securities to complex financial service structures, each of which has the potential to be included in the regulatory framework of traditional financial products. This means that the future development path of digital assets is not only driven by technology, but also by how the regulatory framework adapts to the disruptive power of these technologies.

The update includes a reassessment of the definition of digital assets, especially how certain complex types of digital assets meet the definition of financial products in the Corporations Act 2001. The document clearly states that the judgment criteria for financial products cover scenarios where "financial investments, financial risk management or non-cash payments are made through a facility." In addition, the document also introduces the application process for regulatory exemptions, especially for digital asset business providers that provide services related to financial products, who need to obtain an Australian Financial Services (AFS) license.

In order to be closer to actual operations, "CP 381" includes multiple real-life cases in the update, such as:

1. Regulatory framework for trading tokens and stablecoins: Stablecoins as financial products will be classified according to how they are anchored to legal tender. For example, if certain stablecoins are considered "non-cash payment tools", they will need to apply for an AFS license and meet the corresponding licensing requirements.

2. RWA Tokenized Securities: Some tokenizations used for real-world assets, if they have securities-like properties, such as giving holders some form of income rights, may be identified as "financial investment tools" and thus need to comply with securities-related regulations.

3. Staking Services: Native token staking services, if they provide fixed returns or have certain investment characteristics, may also be considered a financial product.

4. Regulatory considerations for NFTs: Non-fungible tokens (NFTs) that only represent artworks or collectibles are generally not financial products, but if they are tied to a financial arrangement, such as providing partial ownership or future income rights, compliance assessments are required based on the specific circumstances.

ASIC uses these cases to help industry practitioners clarify compliance requirements under different business forms and provide references for how to adjust business models to comply with current regulations.

Although such updates help clarify the financial attributes of digital assets, they also reveal the confusion and exploration of regulatory authorities when facing new asset classes. ASIC emphasized its adherence to "principle-based regulation", that is, trying to govern these emerging technological forms through existing financial regulations. Although this approach can improve compliance consistency, when faced with complex and diverse Web3 scenarios, more detailed rules and guidelines are often needed to prescribe the right medicine. This is exactly the problem that the introduction of multiple cases in the document aims to solve - through specific scenario examples, practitioners can understand how to adjust their business to a compliant track.

Third, the current status of the Australian cryptocurrency market

Australia's cryptocurrency market has experienced significant development in recent years, showing a trend of diversification and rapid growth. According to a research report in June 2023, about 31.6% of Australians hold or have held cryptocurrencies, and the penetration rate ranks among the top in the world. This high level of participation reflects the public's strong interest in digital assets. Meanwhile, the number of cryptocurrency ATMs in Australia has surged, exceeding 1,200 as of August 2024, making it one of the fastest growing in the world. The widespread deployment of these ATMs facilitates users' conversion between digital currencies and cash, further promoting the popularity of cryptocurrencies. In terms of the regulatory environment, Australia has been at the forefront of cryptocurrency regulation. As early as 2017, the government abolished double VAT on cryptocurrency transactions, lowering transaction barriers. However, with the rapid development of the market, regulators such as the Australian Securities and Investments Commission (ASIC) and the Australian Transaction Reports and Analysis Centre (AUSTRAC) have strengthened their supervision of the field, and the future regulatory framework is expected to be finalized by mid-2025.

Fourth, global perspective and policy impact: between uniformity and differentiation of regulation

In the current wave of digital asset regulation, the balance between globalization and localization has become a key factor in determining the success or failure of policies. ASIC's approach to a certain extent reflects Australia's response to global regulatory trends, such as the policy recommendations of the International Organization of Securities Commissions (IOSCO) on the crypto asset market mentioned in the document. In other regions,the European Union's "Markets in Crypto Assets Regulation Act" (MiCA) and regulations in Singapore, Hong Kong and other places also show the same regulatory logic: on the basis of following "same activities, same risks, same regulation" as much as possible, fine-tuning is made according to the uniqueness of different asset classes.The existence of convergence and differences in this regulatory framework provides an environment of both opportunities and challenges for global participants in the Web3 field. ASIC also mentioned that the Australian government is promoting a new regulatory framework for payment service providers, which will not replace existing financial services regulations, but will serve as a supplement. This means that digital asset platforms and digital asset facilities (DAPs and DAFs) need to comply with both new payment regulations and traditional financial services regulations. This "dual-track regulatory" model is similar to the practices in Europe, Hong Kong and other places, ensuring that emerging financial technology products enjoy both freedom of innovation and strict supervision in terms of security and transparency. The Australian market and policies are also areas of focus for Aiying, and many customers have chosen to take root here. It can be seen from this consultation document of ASIC that the regulatory path of Web3 is gradually becoming clear. Regulators are no longer just responding passively, but actively participating in attempts to guide the development of technology through new regulations. This means new opportunities for industry practitioners and us. Let us look forward to the release of the final policy details.