AUSTRALIA Law and Practice Contributed by: Steven Pettigrove, Katrina Sharman, Luke Higgins and William Deeb, Piper Alderman
under the Corporations Act. This reflects their pay- ment function (ie, facilitating transfers and settlement). Algorithmic Stablecoins (or Digital Assets Where the Price References a “Real-World” Asset) ASIC indicates that algorithmic stablecoins are likely to be “derivatives”. This is because their value depends on a mechanism (eg, supply adjustment algorithm or linked token system) rather than a redeemable claim on fiat reserves. 6.2.2 Stablecoin Regulation Australia does not have a bespoke legal regime that specifically regulates stablecoins. Fiat backed stable- coins are currently regulated under existing financial services laws, depending on their features and use cases. In practice, a fiat backed stablecoin used for pay- ments will generally be characterised as an NCPF and therefore a financial product under the Corporations Act. As a result, issuers and intermediaries will typically be required to hold an AFSL and comply with disclosure, conduct and licensing obligations. ASIC has taken steps to licence three stablecoin issu- Australia’s proposed payments reforms introduce a new stored value facility (SVF) regime that directly captures certain stablecoin arrangements. The frame- work replaces the existing NCPF approach with a function based model that regulates payment activity based on what a provider does. Under the reforms: • fiat-backed “payment stablecoins” are treated as tokenised SVFs, where the regulated product is the underlying facility, not the token itself; • issuers must provide redemption rights, reserve backing and regular disclosures; and • large issuers may be regulated as “major SVFs” by APRA, introducing prudential oversight. ers under the AFSL regime as NCPFs. Proposed Payments Reforms Regarding Stablecoins
Overall, stablecoins are repositioned as payment instruments akin to electronic cash, rather than tradi- tional financial products. Stablecoin Relief ASIC has provided transitional relief for “eligible sta- blecoins”, subject to strict prudential criteria, includ- ing: • the stablecoin is issued by an eligible stablecoin issuer (typically, a stablecoin issuer that holds an AFSL licence or an exempt foreign issuer); • there are redemption rights associated with the stablecoin (ie, it can be unconditionally redeemed for the underlying currency); • the stablecoin issuer must maintain cash or cash equivalent reserves that are equal or greater than the total underlying amount of stablecoins on issue; and • the stablecoins have no right to or receive a finan- cial return, other than redemption rights. Relief is available to certain intermediaries (eg, exchanges or distributors) in limited circumstances, but: • eligibility is narrow and tightly defined; and • many widely used global stablecoins may fall out- side the scope due to non cash reserves or mixed backing models. 6.2.3 Backing Assets If a digital asset business wishes to rely upon the sta- blecoin relief mentioned above, backing assets must be: • cash or cash equivalent reserves that are equal to or greater than the total underlying amount of stablecoins on issue; and • stablecoins that have no right to receive a financial return other than redemption rights. 6.2.4 Special Considerations Once the payment reforms are settled and come into place, systemically significant stablecoins (ie, large payment stablecoins) will be subject to enhanced requirements under the “major SVF” regime.
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