The Australian Securities and Investments Commission (ASIC) has published a consultation paper aimed at providing greater clarity on how the current definitions of financial products apply to digital assets and related products.

Namely, Information Sheet 225 Crypto Assets (INFO 225) outlines ASIC’s views on when a cryptocurrency or digital asset, or related product, may qualify as a financial product.

In addition, the paper also discusses the scenarios where a person may provide a financial service that requires an ASIC licence.

"In line with the continued expansion and emerging offerings of digital asset markets, our regulatory approach also continues to evolve," ASIC said in the document, which includes 13 "practical examples" demonstrating how current financial product definitions apply to digital assets and related products.

"We believe now is a good time to update INFO 225. This is facilitated by the existing regulatory regime, which is principles-based and provides sufficient flexibility to regulate digital assets that are financial products."

ASIC examples range from exchange tokens to digital asset wallets, further demonstrating how current definitions and concepts apply to hypothetical digital asset scenarios under the existing regulatory regime.

The consultation document specifically seeks feedback on the application of existing Australian Financial Services License (AFSL) processes, ASIC guidance and standard conditions to digital asset businesses.

The corporate regulator is also seeking feedback on practical packaged token and stablecoin licensing issues, and in particular on issues arising from the potential transition to the government's proposed digital asset platform and stablecoin payment regimes, and on the consideration of potential regulatory relief.

Additionally, it is seeking feedback from stakeholders on a potential "no action" position for digital asset businesses that are in the process of applying for various licenses.

ASIC Commissioner Alan Kirkland stressed the importance of regulatory clarity, noting that a well-regulated financial system benefits everyone in the community and supports "consumer confidence, market integrity and facilitates competition and innovation".

“Australia's financial services regulatory regime is broad and technology neutral. Many digital assets and related products are financial products under current law,” he said in the release.

"Stakeholders are calling for greater clarity, and in response we are releasing our draft updated guidance."

ASIC first published guidance on crypto assets in 2017, looking at how Companies Act financial product definitions may apply to crypto assets and related products and services.

INFO 225 was subsequently updated in 2018, 2019 and 2021.

In 2018 the term "crypto asset" was also introduced in the 2019 update. added additional information and broader consideration of when crypto-assets and related products may be financial products.

It was further updated in 2021 to add good practice guidelines for investment products providing exposure to crypto assets.

ASIC notes that digital asset markets have evolved significantly over the past 10 to 15 years, growing from a few hundred digital asset tokens to tens of thousands today.

According to the data, over 360 digital currency exchanges are currently registered with the Australian Transaction Reporting and Analysis Centre.