AUSTRALIA Law and Practice Contributed by: Steven Pettigrove, Katrina Sharman, Luke Higgins and William Deeb, Piper Alderman
However, there are important limitations: • the CAR must act strictly “on behalf of” the licen- see and within the scope of the licence; • the licensee retains full legal responsibility and must supervise and monitor the CAR’s conduct; and • the CAR cannot hold itself out as licensed and must clearly disclose its representative status. Courts have emphasised that firms cannot use CAR structures to avoid licensing requirements, particularly where they operate independently or issue products in their own name. An alternative intermediary authorisation may apply to issuance models offered in partnership with a financial services licensee. DeFi is permitted in Australia, but it is regulated through existing financial services and AML/CTF laws applied on a technology neutral basis. DeFi is not treated as a separate category; instead, activities are regulated by function, meaning lend- ing, staking or liquidity pooling may trigger Austral- ian Financial Services Licensing requirements if they constitute financial products or services. CeFi CeFi firms may utilise DeFi, but firms must assess and address its scope of: • licensing risk (AFSL triggers); • AML/CTF obligations, now expanded to virtual asset services; • sanctions compliance; and • custody and client asset protection risks. 5.2 DeFi Structures DeFi is not prohibited in Australia, but there is no spe- cific legal framework; thus, projects typically oper- ate through traditional entities alongside on-chain 5. Decentralised Finance 5.1 Ability to Use DeFi DeFi
arrangements. However, a difficulty arises in relation to DeFi where a protocol operates autonomously and does not fit neatly or at all, within the existing regula- tory framework. It is also unclear how regulators may attempt to impose liability or accountability on DAOs or their participants. The Senate Committee has pro- posed legal recognition of DAOs, but the proposal has not been taken up by the Australian government to date and there is no case law to date addressing the legal capacity or liability of DAOs. 5.3 Liability Australian regulators and courts have not yet approached the concept of accountability or liability in relation to DeFi. ASIC would likely focus on identifiable intermediaries, promoters and operators and apply existing financial services laws where conduct targets Australian users. Crypto-asset payments are permitted in Australia. Where crypto is used through a platform or wallet, it may constitute a “non cash payment facility” (NCPF), a financial product under the Corporations Act. Providers of such facilities (eg, payment platforms, wallets) generally must hold an AFSL and comply with conduct and disclosure obligations. Separately, crypto payment intermediaries are typical- ly subject to AML/CTF regulation, including AUSTRAC registration, customer due diligence and transaction monitoring. 6.2 Stablecoins 6.2.1 Fiat Currency and Algorithmic Stablecoins Under ASIC’s INFO 225, the regulator adopts a func- tional, product based distinction between fiat backed stablecoins and algorithmic stablecoins. Fiat Backed Stablecoins (or “Yield-Bearing Stablecoin”) ASIC’s position is that fiat backed stablecoins are generally NCPFs and therefore financial products 6. Payments and Stablecoins 6.1 Payments
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