AUSTRALIA Law and Practice Contributed by: Steven Pettigrove, Katrina Sharman, Luke Higgins and William Deeb, Piper Alderman
reforms include the adoption of the virtual asset ser- vice provider (VASP) concept, a shift toward regulating “virtual assets”, the introduction of the travel rule and the extension of international value transfer service obligations. These amendments reflect a move toward greater alignment with Financial Action Task Force (FATF) expectations and global risk based supervisory models. In relation to the International Organisation of Securi- ties Commissions (IOSCO), Australia’s approach has been to align substantively with the principles under- pinning IOSCO’s 2023 policy recommendations. Specifically, applying the Australian financial services regime to crypto-asset activities, particularly with respect to licensing, disclosure, consumer protection and the custody of client assets. 2.2 Crypto-Asset Regulatory Frameworks Australia has not adopted a formal classification sys- tem for crypto-assets. Instead, whether a crypto-asset or crypto-related service is regulated under Australian financial services law turns on an assessment of its legal characteristics. Regulators’ Approach to Classification Regulators take a case-by-case approach focusing on whether a particular crypto-asset or activity falls within existing legal concepts. The central question is whether the asset constitutes a “financial product” under the Corporations Act, which broadly captures facilities through which a person makes a financial investment, manages financial risk or makes non– cash payments. Certain things, such as securities, derivatives and interests in a managed investment scheme, are specifically deemed financial products. ASIC has indicated that this assessment depends on the rights and features of the specific token or arrangement and that many crypto-asset activities may fall within the financial product regime. Where a crypto-asset does not satisfy that definition, it may be treated as a form of property or goods, with regulatory consequences determined accordingly. DAF Act Classification The reforms under the DAF Act adopt an activity- based approach to classification, focusing on the
function performed rather than the inherent char- acteristics of a crypto-asset. This means regulatory outcomes are determined by how a product or ser- vice operates in practice, particularly where custody, trading or tokenisation activities are involved. How- ever, token-by-token analysis remains critical, as the classification of individual tokens continues to inform whether additional licensing obligations apply. At the centre of the framework are two new regulated financial products: digital asset platforms (DAPs) and tokenised custody platforms (TCPs). These concepts extend the Australian financial services licensing (AFSL) regime to capture custodial and tokenisation activities involving digital assets. A DAP broadly cov- ers arrangements in which an operator holds or con- trols digital assets on behalf of clients, whereas a TCP applies to structures in which real-world assets are tokenised and held for the benefit of token holders. These categories operate as a regulatory “wrapper”, requiring licensing regardless of whether the underly- ing assets are themselves financial products. Regulatory Frameworks Crypto-assets are primarily regulated through the following legal frameworks rather than a bespoke regime. In particular: • the Corporations Act, which incorporates the DAF Act and applies where crypto-assets or related activities involve financial products or financial services; • the AML/CTF Act applies to businesses providing “designated services”, including certain crypto- asset exchanges and, increasingly, broader virtual asset activities; and • general consumer protection laws, including the Australian Consumer Law, apply to all crypto-asset businesses regardless of token classification. Regulated Activities The following crypto-asset activities, amongst others, are regulated in Australia (but legal advice is required depending on structure and function): • financial services involving crypto-assets, includ- ing issuing, dealing, advising or operating a facility involving crypto-assets that are financial products;
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