Australian Regulators Weekly Wrap – 28 March 2022

  1. Crypto Regulation (Treasury): The Treasury has released its consultation paper on Crypto asset secondary service providers: Licensing and custody requirements (Consultation Paper) raising 32 consultation questions in relation to crypto licensing and custody requirements. The Consultation Paper fulfils the governments December 2021 commitment in its Transforming Australia’s Payment System report, to develop a licensing and custody regime for digital assets, with advice to be provided to Government on policy by mid-2022. The Consultation Paper looks at proposals for a licensing regime for crypto asset secondary service providers (CASSPrs), custody obligations to safeguard private keys and seeks early views on the classification of crypto assets. CASSPrs will be:
    • entirely separate to the AFSL regime;
    • overlap with the key AFS licensing obligations under s912A of the Corporations Act, for example efficiently, honestly and fairly;
    • include a various recent Corporation Act obligations which sit outside the general licensing regime such as anti-hawking; and
    • adds some weird other thought bubbles, which seem like they have come from the ACCC’s battles with social media platforms, for example the obligation to respond to scams in a timely matter.
      In my view straight crypto shouldn’t be regulated as a financial product at least on to this degree since is it broadly analogous to currency (FX providers trading spot do not need an AFSL) expect me to say more on this in Gadens’ response to the consultation paper. There is so much to cover in this consequential paper, that I can only recommend you read it in full or our detailed article over on it here.
  2. Managed Funds (ASIC): ASIC has commenced a surveillance into the marketing of managed funds to identify the use of misleading performance and risk representations in promotional material. ASIC is scrutinising traditional and digital media marketing of funds, including search engine advertising, targeting retail investors and potentially unsophisticated wholesale investors, such as some retirees. ASIC has stated that it is concerned that, in the current highly volatile and low-yield environment, consumers seeking reliable or high returns are being misled about the performance and risks of the funds they are investing in.
  3. Safe Harbour (Treasury): Treasury has released the final report of the Review of the insolvent trading safe harbour. The report concludes that the safe harbour protections offer considerable assistance in encouraging an active turnaround market, particularly for larger companies. However, the the report highlighted concerns as to the relevance and applicability of the safe harbour (and, indeed, the underlying prohibition on insolvent trading) to the SME market. It also recommends a holistic review of the insolvency regime, which I am all for we are far less agile than our American cousins in this space.
  4. Finfluencers (ASIC): ASIC has published an information sheet about discussing financial products and services online. It outlines how the law applies to social media influencers, and the licensees who use them. In 2021, the ASIC young people and money survey found that 33% of 18 to 21 year olds follow at least one financial influencer on social media. The survey found a further 64% of young people reported changing at least one of their financial behaviours as a result of following a financial influencer. A timely and prudent update then, ASIC’s information sheet highlights activities where influencers may contravene the law if they are unaware of the legal requirements e.g. general advice; explains issues for influencers to consider e.g. whether an AFS licence is needed; and, reminds AFS licensees who use influencers to undertake the same governance and oversight they would for any other AR. e.g. DDO.
  5. Disinformation laws (Parliament): The Government will introduce legislation this year in an effort to combat harmful disinformation and misinformation online. The legislation will provide the Australian Communications and Media Authority (ACMA) with new regulatory powers to hold tech companies to account for harmful content on their platforms. ACMA will be given new information-gathering powers to incentivise greater platform transparency and improve access to Australia-specific data on the effectiveness of measures to address disinformation and misinformation. In addition, ACMA will be given reserve powers to register and enforce industry codes or make industry standards. A Misinformation and Disinformation Action Group will be established, bringing together key stakeholders across government and the private sector to collaborate and share information on emerging issues and best practice responses. All very interesting, though slightly Orwellian sounding stuff. As always, the devil will be in the detail here

Thought for the future: For crypto and CASSPRs, how does the creation of an entirely new complicated licence regime to be housed within the Corporations Act 2001 (Cth) fit in with the ALRC’s simplification mandate!

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