Financial regulators are hitting the accelerator in creating rules to address the rapid growth in new digital assets.
McCullough Robertson Lawyers partner Lucy Adamson said one of the most notable developments at this year’s Digital Economy Council of Australia (DECA) conference was the level of regulator involvement.
The DECA conference is held every year, but this was the first year it included active involvement from all the key regulators – ASIC, AUSTRAC, APRA and the ATO.
“Historically, regulators have viewed digital assets through the lens of the existing regulatory regime and have been fairly resistant to creating legislation specifically for digital assets,” she said.
“That position has now shifted.
“By late 2026, we’ll see the implementation of new legislation covering financial products and services relating to digital asset platforms. It’s recognition that the existing framework needs to evolve because of what’s happening in the market.”
In an interview with Newsreel, Ms Adamson also observed that:
- Defining exactly what constitutes a digital asset remains one of the biggest regulatory challenges.
- Overseas businesses are increasingly seeking advice on how Australia’s evolving framework applies to them.
- Younger Australians are driving broader acceptance of cryptocurrency and other digital financial assets.
Regulators move closer to industry
“I’ve worked in financial services my whole career and we’ve seen a wide range of financial products and services emerge over time,” Ms Adamson said.
“Digital assets have been bubbling away in the background for quite a while.”
She said one of the biggest changes over that time had been in the way regulators engaged with industry during the reform process.
Previously novel products, such as Buy Now Pay Later, operated in a “grey” regulatory space for some time before a clear regulatory framework was established.
“The legislation tends to be drafted quite broadly, which means the guidance around it becomes incredibly important,” Ms Adamson said.
“The challenge is that technology is developing extremely quickly while regulators are trying to keep pace.
“There is a lot of engagement between industry and ASIC at the moment. What’s striking is how collaborative the process has become. Compared with previous regulatory reforms, we’re now seeing far more education and engagement between regulators and industry.”
Defining the digital world
One of the biggest challenges in this space is deciding what should and should not be regulated.
Ms Adamson said the legal definition of a digital asset remained one of the central questions facing policymakers.
“How something is defined is critical in any regulatory change,” she said. “The devil is always in the definitions.
“There has been considerable debate on how digital assets should be defined. Under the new regime regulation will apply to digital asset platforms and tokenised custody platforms, but the scope of regulation hasn’t typically been a straightforward question.”
Australia still finding its footing
The evolving framework is has created uncertainty for businesses wanting to invest and operate in Australia.
“We’re seeing a lot of international businesses wanting to enter the Australian market. Many have already established themselves in jurisdictions like the UK, the US and parts of Asia,” Ms Adamson said.
“Their question is simply: ‘We have this product. We want to launch it in Australia. Where do we fit within your regulatory framework?
“The challenges are that anti-money laundering laws have recently changed, digital asset regulation is changing, and payments regulation is still coming. Without certainty, it becomes difficult for businesses to invest confidently.”
Security versus convenience
As digital financial products become more common, security is also becoming an increasingly important consideration.
Ms Adamson said stronger safeguards were likely to become a permanent feature of the financial system.
“Cybersecurity is, of course, becoming an increasingly significant issue,” she said.
“There are stronger regulatory requirements emerging around cybersecurity, particularly for regulated entities.”
The growth of de-banking
Ms Adamson said another issue was “de-banking”.
“Some digital asset businesses struggle to obtain banking services because banks consider them outside their anti-money laundering risk appetite,” she said.
“That’s a real challenge for start ups or newer businesses.
“At the same time, blockchain technology itself can improve transparency and help reduce risks such as money laundering.”
Crypto becoming mainstream
While regulation is still evolving, consumer behaviour has already changed.
Ms Adamson said younger Australians were becoming increasingly comfortable investing in digital assets, making them a far more mainstream part of the financial landscape.
“The younger generations are already using technology to invest in ways that more traditional investors typically don’t,” she said. “Demand already exists.
“I think we’ll continue to see significantly greater investment in these assets over time.”
She said greater regulatory certainty would also encourage more established financial institutions to enter the crypto market.
“Regulation brings legitimacy,” she said.
“Once these products are clearly regulated, banks and other major financial institutions will absolutely look to participate in this market. That wasn’t going to happen while there was significant uncertainty.”
“With regulation comes confidence. Following the regulation, I think we’ll see substantial growth from traditional financial players moving into digital assets.”
