Australia Redefines Crypto Rules: Regulate by Function, Not Technology

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• Australia treats crypto based on economic function, not as a separate asset class.
  
• Tokenized securities and stablecoins fall under existing financial laws.
  
• Regulatory focus is on intermediaries and practical control, not decentralization claims.

Australia is taking a fresh approach to crypto oversight, focusing on the economic role of digital assets rather than their technological form. This perspective comes from Rhys Bollen, the head of fintech at the Australian Securities and Investments Commission (ASIC), who presented his views at the Melbourne Money & Finance Conference.

Regulating Crypto by Economic Function

Bollen emphasized that blockchain and digital assets perform the same functions as traditional financial instruments—capital allocation, payments, and risk management. “Digital assets largely represent new technological instances of longstanding financial activities,” he said. This suggests that crypto shouldn’t be treated as a separate asset class under Australian law.

Under this framework, tokenized securities fall under existing securities regulations, while stablecoins trigger payment services legislation. Other crypto activities may be subject to consumer protection laws, depending on their function. The focus is on substance over form, meaning that technological labels like “blockchain” or “token” shouldn’t dictate regulatory treatment.

Australia vs. International Approaches

Bollen’s approach differs from frameworks abroad. In the U.S., the CLARITY Act and Europe’s Markets in Crypto-Assets Regulation create crypto-specific rules. Australia, in contrast, is integrating digital assets into the existing financial regulatory structure through the Digital Asset Framework bill. The legislation amends parts of the Corporations Act rather than creating an entirely new crypto law.

ASIC Information Sheet 225 reinforces this view, confirming that digital assets can be treated as traditional financial products—securities, derivatives, managed investment schemes, or non-cash payment facilities—depending on their function. The guidance also prioritizes regulation of intermediaries over tokens themselves, since most consumer harm has come from platform conduct in trading, lending, or custody services.

Also Read: Australia’s Crypto Boom Hits 31% Adoption — But One Major Problem Still Holds It Back

Addressing Decentralized Challenges

Decentralized protocols still pose challenges. Bollen noted that regulatory oversight should focus on identifiable parties controlling protocol design or economic outcomes. Even if a product claims decentralization, regulators can enforce obligations where practical control exists.

Australia’s function-based approach emphasizes clarity, consistency, and consumer protection. By regulating crypto according to economic substance, the country aims to reduce regulatory loopholes while integrating innovation into its existing financial framework. As crypto adoption grows, this pragmatic model may offer a blueprint for other jurisdictions seeking balance between innovation and oversight.

Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.