The problematic matter of regulating crypto

It is important to ensure that technology does not drive the regulation of crypto assets, according to the Australian Law Reform Commission (ALRC).

There had been a 63% increase in the number of Australians transacting digital assets between 2020 and 2021, according to ALRC, reflecting a need for their regulation.

To start with, there was no definition of ‘crypto asset’ or ‘digital asset’ in Australian legislation which made it difficult to determine how they should be regulated.

Speaking to the House of Representatives Standing Committee on Economics earlier this month, Joe Longo, chair of the Australian Securities and Investments Commission (ASIC) said cryptocurrency was a topic of concern for the regulator and one where it would take action on actions harming consumers.

“Promotion of these assets through popular and viral channels can make them appealing to investors, but there continues to be lack of public awareness of their highly volatile, risky and complex nature. We are supportive of government’s action to establish a regulatory framework in this space and will continue to work with Treasury and other stakeholders,” Longo said.

In a report by the Australian Law Reform Commission (ALRC) on new business models, technologies and practices, it outlined the challenges to determine how new assets such as crypto should be regulated.

“It is important to ensure that regulation is not unduly driven by technology, whether in terms of how concepts should be labelled or defined, or in terms of whether new regulation should be created to govern technology-enabled innovation.

“In this regard, it is suggested that the regulation of crypto assets should be driven less by technology and more by the function that crypto assets perform and the obligations to which persons who deal in, or provide services in relation to, crypto assets should be subject.

“A regulatory approach that is unduly driven by technology is likely to increase the complexity of the legislative framework for corporations and financial services regulation and make it more difficult to achieve meaningful compliance with the substance and intent of the law.”