ASIC's Rhys Bollen advocates economic substance over technology in regulating blockchain and crypto, focusing on tokenized securities, stablecoins, and fin
Regulatory Approach to Blockchain and Crypto: Economic Substance Over Technology
Australian Securities and Investments Commission (ASIC) head of fintech, Rhys Bollen, presented a paper at the Melbourne Money & Finance Conference advocating for a regulatory approach that focuses on the economic substance of blockchain and crypto assets, rather than their technological form. This perspective contrasts with specific regulatory frameworks in other regions, such as the CLARITY Act in the U.S. and the Markets in Crypto-Assets Regulation framework in Europe.
Tokenized Securities and Stablecoins
According to Bollen, tokenized securities should be regulated under existing securities laws, while stablecoins should be subject to payment services legislation. Other crypto elements may come under consumer protection laws. Bollen emphasized that the three main financial functions—capital allocation, payments, and risk management—have evolved with technological advancements, and that blockchain, as a distributed ledger technology, should not be treated differently.
Historical Context and Regulatory Adaptation
Bollen noted that regulatory systems have adapted to technological changes, such as the transition from paper instruments to electronic records, without abandoning foundational principles like consumer protection, market integrity, and systemic stability. This approach aligns with the evolving nature of financial instruments and services.
Australia’s Approach to Crypto Regulation
Australia is adopting a tailored approach to integrate digital asset platforms into the existing regulatory architecture. The main piece of crypto legislation, the Digital Asset Framework bill, seeks to amend parts of the Corporations Act without abandoning the existing financial services framework. Bollen highlighted that this approach reduces the risk of regulatory arbitrage.
Regulatory Perimeter and Consumer Protection
ASIC Information Sheet 225 explicitly states that existing definitions of "financial product" and "financial service" under the Corporations Act can apply to digital assets. The guidance rejects the notion that digital assets constitute a discrete asset class for regulatory purposes, confirming 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.
Focus on Economic Characteristics
Bollen argued that a focus on economic characteristics, rather than technological labels, will provide clearer rules for market participants and reduce opportunities for regulatory arbitrage. The regulatory approach is also focused on the regulation of intermediaries rather than tokens, with most consumer harm stemming from crypto platforms offering custody, trading, lending, or yield services.
Challenges with Decentralized Products
While acknowledging that classification issues may arise with decentralized products or services, Bollen suggested that legal analysis should focus on practical control and benefit, rather than formal claims of decentralization. He emphasized that where identifiable parties exercise significant influence over protocol design, governance, or economic outcomes, regulatory obligations should apply.
This approach by ASIC reflects a pragmatic and forward-looking perspective on regulating blockchain and crypto technologies, aiming to ensure both innovation and regulatory compliance in the Australian financial landscape.
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