Aussie crypto reforms to keep lawyers, regulators busy

Planned new rules for the crypto sector have been cautiously welcomed by the industry, while lawyers say they could put more pressure on regulators.

Miami’s robo-crypto bull statue reflects the bullish sentiment among cryptocurrency enthusiasts, triggered by Donald Trump’s re-election. Picture: Joe Raedle/Getty Images/AFP

Proposed new rules for Australia’s cryptocurrency sector won’t drive the industry offshore in a “mass exit” from the nation, according to law firm Clyde & Co partner Jehan-Philippe Wood.

He said the Australian Securities & Investments Commission’s regulatory guidance for businesses selling crypto assets, which was released for feedback late last year, could lead to an influx of businesses applying for financial services licences and lift the number of lawyers specialising in crypto and digital asset ­regulation.

“Despite an initial concern that the industry may be pushed offshore, I don’t think the latest development should be seen as foreshadowing a mass exit of crypto businesses from Australia,” Mr Wood said.

A cryptocurrency advertisement on a bus shelter in Sydney. Picture: NCA NewsWire/Joel Carrett

“It may encourage a large number of new (Australian financial service licence) applications in the near future, which may bring its own issues as it will require the industry, including ASIC, to beef up its resources to cope with the increased activity.”

Mr Wood, who leads Clyde & Co’s digital assets and blockchain team, said there had been some concern that ASIC may face resourcing pressures as the number of applications increases, but it was understood the regulator had been planning for that.

An ASIC spokesman said the regulator had been “actively planning” for a spike in cryptocurrency businesses applying for financial service licences.

“We are already seeing more businesses applying for financial service licences and will continue to engage with stakeholders in 2025 to discuss the needs of the sector,” he said.

ASIC commissioner Alan Kirkland recently revealed the regulator’s plans to introduce new rules for the sector, including offering companies a grace period from enforcement action if they apply for a financial services licence. The regulator expects most to apply for a licence.

The plans, which have been cautiously welcomed by some in the sector hoping for more clarity about their regulatory responsibilities, were released ahead of being finalised by July.

They came ahead of the Albanese government’s plans to introduce a new laws for entities that give consumers access to digital assets.

ASIC’s guidance note said its new rules would complement the government’s proposed reforms, and that clarifying what constitutes a financial product under current financial services laws “will remain essential”, even with these reforms.

Australian Securities & Investments Commission member Alan Kirkland revealed the regulator’s plans to introduce new rules for the sector. Picture: Jane Dempster.

Mr Wood said ASIC’s plans were on the right track, and in line with the “dominant message” that the current financial services regime applies to the “majority of products and services being provided here in the digital asset space”.

“Market participants should understand that,” he said.

“Effectively, they’re giving broad guidance, but they are saying, at the same time, take the time to look carefully at what you are proposing to do and assess whether it comes into the regulatory perimeter.

“The implication is, go and get expert advice.”

The guidance gave real world examples about how ASIC thought the financial services regime applied to digital assets, with some room for nuance when assessing which products were in or out of the financial services regime, Mr Wood said.

“So effectively, they’re giving broad guidance, but they are saying, at the same time take the time to look carefully at what you are proposing to do and assess whether it comes into the regulatory perimeter,” he said.

ASIC has launched an increasing number of lawsuits against crypto companies recently to clarify the law or protect consumers, and Mr Wood said the legal industry was matching this with more lawyers specialising in digital asset and crypto regulation.

Clyde & Co partner Jehan-Philippe Wood says the changes are unlikely to force a mass-exit of businesses.

“There’s been an increase in activity across the industry. There are new (crypto) entrants all the time. They’ve been lots of new entrants and new products and new services,” he said.

“And yes, the legal industry has responded to that. There has been an increase in the number of practitioners who are active in this space, and the number of firms who are providing services in this space.”

ASIC did brief external law firms to carry out complex enforcement investigations, Mr Wood said.

An ASIC spokesman said the regulator carried out investigation and enforcement action using its internal resources, but from “time to time we may engage external professionals, such as law firms, to assist in accordance with the relevant rules”.

A number of court decisions have gone in ASIC’s favour after it sued a number of crypto players in recent years.

An $8m fine was handed to US crypto giant Bit Trade, which operates the Kraken exchange and offered a margin trading facility to Australian consumers, after the regulator and company agreed it breached design and distribution obligations.

A Kraken spokeswoman said the operator appreciated the court recognised its compliance efforts, but was “disappointed with the outcome of this case”.

“We believe this case highlights the urgent need for bespoke crypto legislation to address the shortcomings that are causing confusion and uncertainty for Australian crypto investors and businesses,” she said. “We believe these rulings significantly hamper growth in the Australian economy. We look forward to engaging constructively with policymakers and regulators as these rules are developed.”

ASIC is also appealing a case it lost in the Federal Court, who found cryptocurrency exchange Finder Wallet did not breach Australian laws by providing “unlicensed” financial services products.