SKN | Australia’s Regulator Says Crypto Is Simply Finance With New Infrastructure

Key Points

• Australia’s securities regulator argues crypto should be regulated based on economic function rather than technology.
• Tokenized securities should fall under existing securities laws, while stablecoins may be governed by payment regulations.
• The approach contrasts with crypto-specific legislation in regions like the United States and the European Union.

Australia’s top fintech regulator says cryptocurrency and blockchain technologies should not be treated as entirely new asset classes but rather as modern versions of existing financial infrastructure.

Speaking at the Melbourne Money & Finance Conference, Rhys Bollen, head of fintech at the Australian Securities and Investments Commission, argued that regulation should focus on what crypto products actually do rather than the technology behind them.

According to Bollen, blockchain and digital assets perform many of the same roles as traditional financial systems, such as facilitating payments, allocating capital and managing financial risk.

Because of this, regulators should apply existing financial rules based on the economic function of a product rather than its technological design.

Regulation Based on Economic Substance

Bollen emphasized that crypto products should fall under the same regulatory categories as traditional financial instruments if they perform equivalent functions.

Tokenized securities, for example, should be treated under existing securities regulations, while stablecoins could fall under payment service legislation.

Other parts of the digital asset ecosystem may be governed by consumer protection laws depending on how they operate.

This approach focuses on the economic substance of financial activity instead of labeling blockchain-based assets as a separate class requiring entirely new legal frameworks.

Australia’s Framework Builds on Existing Laws

Australia has already started applying this principle through proposed legislation and regulatory guidance.

The country’s developing digital asset rules, including the Digital Asset Framework bill, largely modify existing provisions within the Corporations Act 2001 rather than creating a completely separate regulatory system.

Regulators have also issued guidance explaining how digital assets may already fall within current definitions of financial products or services.

Under this interpretation, certain tokens may qualify as securities, derivatives, managed investment scheme interests or payment facilities depending on how they are structured and used.

Focus on Intermediaries Rather Than Tokens

Bollen noted that regulatory attention should primarily focus on the platforms and intermediaries operating within the crypto ecosystem rather than the tokens themselves.

According to regulators, many of the major risks to consumers in digital asset markets have emerged from crypto platforms offering custody, trading, lending or yield services.

Addressing the conduct of these intermediaries could therefore provide stronger investor protection without restricting technological innovation.

Decentralization Still Presents Legal Challenges

Despite the clarity offered by function-based regulation, decentralized finance systems may still create legal challenges.

Some blockchain projects claim to operate without centralized control, making it more difficult to determine who is responsible for compliance or oversight.

Bollen suggested that regulators should focus on practical control and economic benefit when evaluating these systems rather than relying solely on claims of decentralization.

As blockchain technology continues to evolve, Australia’s regulators appear to be positioning themselves to integrate crypto into existing financial rules rather than building an entirely new legal framework around it.