ASIC Commissioner Alan Kirkland emphasizes the importance of addressing the “regulatory trilemma” concerning financial innovations, which encompasses consumer protection, market integrity, and fostering financial innovation.

The Australian Securities and Investments Commission (ASIC) is gearing up to unveil a series of regulatory reforms tailored for the cryptocurrency sector, with a sharp focus on achieving specific regulatory outcomes.

At “The Brief – Open Forum” during Blockchain APAC’s Policy Week on March 20, ASIC Commissioner Alan Kirkland outlined the agency’s strategy to nurture responsible financial innovation. Kirkland highlighted the challenge of addressing the “regulatory trilemma” inherent in financial innovations, which encompasses safeguarding consumer interests, upholding market integrity, and fostering innovation.

ASIC’s objective is to bolster confidence in crypto and decentralized financial systems by enhancing oversight while striking a balance among the trilemma factors. Kirkland disclosed that ASIC has provided informal regulatory guidance to over 900 entities since 2016, and has received numerous proposals for tokenizing financial products and real-world assets. He noted that while some forms of tokenization would fall under the current regulatory framework, others would be subject to the government’s digital asset platform proposal.

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Kirkland emphasized that ASIC’s approach to innovation and regulation aims to mitigate risks associated with digital assets and facilitate their broader adoption. In October 2023, the Department of the Treasury released a consultation paper suggesting the mandatory requirement for crypto exchanges to acquire a financial services license from the local financial regulator. Under the proposed rules, any crypto exchange holding more than 5 million Australian dollars ($3.2 million) or over AU$1,500 ($946) per individual would need to obtain a license from ASIC.

While the proposal elicited a varied response from crypto exchanges operating in Australia, the Treasury clarified that the purpose of the consultation paper is to gather feedback on the multitude of questions and regulations outlined within it.