By Daniel Knight and Oliver Herrmann
New licensing requirements for crypto service providers are coming, following a series of consultations launched last week by Treasurer, Jim Chalmers. The Government approach focuses on strengthening enforcement, bolstering consumer protection and ultimately establishing a new licensing framework.
As a first stage, Treasury has released a Token Mapping Consultation Paper to categorise the various elements of the crypto ecosystem.
ASIC’s funding for crypto enforcement activities is also to be increased, enabling the regulator to focus on consumer protection under the existing regulatory framework. Later this year, Treasury will also consult on a new licensing regime for crypto service providers, drawing upon the work of the token mapping.
The token mapping exercise will assess the existing financial services regulatory framework and categorise crypto assets using a “functional approach” – that is, focusing on the function they perform, rather than on the underlying technology.
If a digital asset has a traditional financial function (such as for making investments or making payments), it is more likely to be classified as a financial product, the consultation paper says. Significantly, the proposed approach is to focus on not just the function of the digital assets but also the function of the “token systems” built around them, including the roles played by intermediaries and service providers. This has the potential to lead to a broader regulatory net than has previously been contemplated.
More to come.