ASIC Exec Puts Foot In Mouth

Have you heard the news? Crypto is like ciggies…prison ciggies that is.

Yes, you read that right. According to the Australian Securities and Investments Commission’s (ASIC’s) Digital Assets Lead, Rhys Bollen, Bitcoin (aka digital gold, the future of money etc.) and other cryptocurrencies potentially share many similarities with prison cigarettes (aka darbs, durries, nails, cigarillos).

Bollen made the unlikely comparison on Wednesday during a liaison meeting with members of Australia’s digital assets industry. The purpose of the meeting was to discuss feedback on a controversial new consultation paper, referred to as INFO-225, which was released by ASIC earlier this month. 

Bollen was asked about an example in the paper explaining the application of Non-Cash Payment (NCP) Facility laws to digital assets — the example relates to stablecoins but is vague enough to similarly apply to all cryptocurrencies. In answering, Bollen acknowledged the complexity of the situation, but then unexpectedly likened crypto to good old fashioned cancer sticks. 

Related: New AUSTRAC Task Force to Combat Crypto ATM Use in Money Laundering

Exsqueeze me? A Bitcoin Is Like a Prison What?

The INFO-225 consultation paper will eventually form the basis of updated guidance to the Aussie digital assets industry. It contains 13 examples of how legislation applies to crypto — it was one of these examples which caused the kerfuffle. (You can have your say up to February 28, 2025).

In response to a request to clarify the NCP example from the consultation paper, Bollen explained:

In theory, almost anything could potentially be used to make a payment to another person. You know, cigarettes are used in prisons as a way of making payments…If the product is promoted as having this as one of its primary uses, and you see that in the marketing…that’s where we’re getting closer to financial product territory. I don’t really have a bright line test for you.

Rhys Bollen, ASIC Digital Assets Lead

It’s an interesting response — off the top of my head I don’t recall the marketing teams at either Bitcoin or the cigarette companies pushing either as primarily a method of payment. (In actual fact, there’s evidence the prison economy runs on ramen noodles.)

His point, however poorly made, was simply that almost anything can be used as a medium of exchange and could therefore potentially be covered under NCP legislation. Unsurprisingly, this overly broad definition of what could be captured under NCP legislation has concerned the Aussie crypto industry, with many worried it could hamper innovation.

Speaking to Decrypt, Michaela Juric, general manager of Programs and Partnerships at the Australian stablecoin project AUDD, said it could have regulatory implications for many parts of the digital assets ecosystem, including things like non-custodial wallets:

I think this view sets a pretty dangerous precedent. For instance, MetaMask is a non-custodial wallet offering. It’s merely a piece of software that allows the user to sign transactions. If one of the primary functions of MetaMask is to allow the user to send and receive payments, then this interpretation by ASIC may result in MetaMask needing to obtain an AFSL to offer its services to Australian users.

Michaela Juric, general manager of Programs and Partnerships at AUDD

Australia Pushing to Tighten Crypto Regulation

The updated guidance Bollen was discussing is part of a push to enhance Australia’s regulation of the crypto industry, with both ASIC and Australia’s financial crimes watchdog, AUSTRAC, recently stepping up their focus on the industry in an effort to crack down on illicit activity.

Earlier this year ASIC said that virtually all crypto-related businesses in Australia will be required to have a financial services license. The regulator has also recently updated its Regulatory Guide 133 for the first time in over two years, adding new requirements for crypto custody providers.

Related: ASIC Says All Crypto Start-Ups Must Have Financial Services Licence

Australia’s financial crimes watchdog, AUSTRAC has also announced a new crypto task force and says it’ll be focussing its enforcement efforts on the crypto industry for the next 12 months — it’s already started this crypto-crackdown with a campaign to stamp out the use of crypto ATMs in money-laundering.