ASIC Sounds Alarm to Sceptical Crowd at Sydney Digital Asset Event

ASIC's Licensing Stance Triggers Industry Alarm

During a discussion with AFR reporter Max Mason, Commissioner Kirkland stated that the majority of crypto businesses in Australia must obtain an Australian Financial Services Licence (AFSL) to mitigate litigation risks. This position aligns with ASIC's broader regulatory strategy of pursuing enforcement actions against unlicensed operators, mirroring the approach taken by the U.S. Securities and Exchange Commission. The commissioner argued that licensing would provide a clear pathway for compliance and reduce legal exposure for businesses operating in the digital asset space.

However, the announcement was met with apprehension by summit attendees, many of whom have engaged with ASIC during product development only to face subsequent enforcement actions. A notable example cited was Finder, which consulted ASIC about the need for an AFSL for its Finder Wallet product and was initially told no licence was required. Despite this guidance, ASIC later sued Finder for offering the product to consumers without appropriate licensing, highlighting the perceived inconsistency in regulatory communication.

The incident underscored a growing frustration within the industry that regulatory engagement does not guarantee protection from future enforcement, particularly when businesses rely on informal guidance that may not hold legal weight. This erosion of trust has complicated efforts to build compliant products within Australia's current regulatory framework.

Legislative Vacuum Fuels Regulatory Uncertainty

A central concern raised by industry leaders is Australia's outdated legal infrastructure for digital assets. The nation's corporations law, which governs many financial services activities, was drafted eight years before Bitcoin's launch and lacks specific provisions for crypto exchanges, custody arrangements, or digital asset financial advice. This legislative gap forces regulators like ASIC to apply existing laws to novel technologies, often resulting in unpredictable outcomes for innovators.

Chloe White, former Treasury digital assets adviser and current consultant to the Dubai government's crypto ecosystem, emphasised that Australia remains far from establishing even basic legal standards for digital assets. She called for urgent reform in areas such as crypto exchange operations, custody services, anti-money laundering protocols, and financial advice related to digital assets, arguing that clear laws are essential to prevent the crushing of local innovation.

Amy-Rose Goodey, managing director of the Digital Economy Council of Australia, added that the absence of clear rules has pushed start-ups into 'stealth mode', where products are developed in secret to avoid regulatory scrutiny. Once developed, many founders plan to relocate operations to jurisdictions like Singapore, Dubai, or the United States — where regulatory environments are perceived as more supportive — to mitigate litigation risks from ASIC.

Government Acknowledges Need for Reform but Offers No Timeline

The Albanese government has acknowledged the need for updated digital assets legislation, having previously announced plans to release draft legislation requiring crypto exchanges to hold financial services licences in 2024. However, this timeline has since slipped, with no revised date provided for parliamentary consideration. Andrew Charlton, the government's special envoy for cybersecurity and digital resilience, affirmed the potential of blockchain technology to boost productivity across sectors but declined to specify when reforms might be introduced.

Charlton described blockchain and digital assets as 'one of the biggest productivity opportunities the world has in front of it', envisioning a future of instant, invisible, and free payments enabled by the technology. Despite this optimism, he stressed that the government is prioritising getting the reform 'right' over speed, a stance that has drawn criticism from opposition figures.

Liberal MP Andrew Bragg condemned the delay, warning that the absence of legislative action effectively allows regulators to assume legislative functions — a development he characterised as 'very dangerous for the country'. Bragg's critique reflects broader concerns that regulatory overreach in the absence of clear laws undermines democratic processes and creates an unstable environment for long-term investment in emerging technologies.

Implications for Australia's Digital Asset Competitiveness

The convergence of ASIC's enforcement-focused stance and the lack of updated legislation poses significant challenges to Australia's ambition to become a regional hub for web3 innovation. Industry participants warn that without regulatory certainty, talent and capital will continue to flow offshore to jurisdictions with clearer frameworks, such as Singapore's progressive payment services regime or Dubai's virtual assets law.

For businesses and consumers alike, the current environment increases the cost of compliance and limits access to innovative financial products developed domestically. While some firms may choose to remain in Australia and navigate the complex regulatory landscape, others are likely to incorporate overseas and serve Australian customers remotely — a scenario that reduces local economic benefits such as job creation and tax revenue.

The situation also raises questions about investor protection. Although ASIC's goal of minimising litigation through licensing aims to safeguard consumers, the lack of clear rules may inadvertently push activity into unregulated or offshore spaces where oversight is weaker, potentially increasing risks for end users.

What this means

ASIC's recent warning at the AFR Crypto and Digital Assets Summit has illuminated a growing tension between regulatory objectives and industry innovation in Australia's digital assets sector. While the commissioner's emphasis on licensing aims to reduce legal risks for businesses and protect consumers, the absence of updated legislation means these goals are being pursued through enforcement in a legal landscape not designed for blockchain technology. Industry figures have responded with alarm, warning that the current approach risks pushing start-ups and talent overseas to more welcoming regulatory environments. For Australia to harness the economic potential of digital assets — including productivity gains, financial inclusion, and technological leadership — it must move beyond reactive regulation and establish clear, modern laws that provide certainty for innovators while safeguarding market integrity. Until such reforms are enacted, the nation's web3 ecosystem will likely continue to operate under a cloud of uncertainty, with significant implications for its long-term competitiveness in the global digital economy.