Deconstructing Digital Currency and Its Risks: Why ASIC Must Rise to the Regulatory Challenge
(2019) 47(1) Federal Law Review 121
31 Pages Posted: 18 Aug 2020 Last revised: 20 Jul 2021
Date Written: January 1, 2019
Digital currency is a ‘disrupter’ of financial services and currency markets and as such presents new regulatory challenges. International regulatory responses to digital currency range from being largely ignored in some jurisdictions to being banned in others with most jurisdictions charting a middle course of ‘wait and see’ while attempting to deal with pressing issues (such as taxation liability and potential money laundering and terrorism financing issues). This article explains digital currency, its benefits, its problems and its risks and the regulatory response so far. It analyses the extent to which the Australian Securities and Investments Commission (ASIC, the national securities regulator) may or may not have regulatory power and jurisdiction under existing Australian law and the role of other relevant regulators and institutions. It concludes that digital currency may well be a ‘financial product’ under s 763A of the Corporations Act 2001 (Cth) (though many suppliers/issuers of that product will be website operators located outside Australia). As a financial product, ASIC would also have jurisdiction over issuers and markets that trade in that product. This could easily be fortified with legislative changes to increase the certainty of this conclusion but in any event it is suggested that ASIC should test its powers. Regulation of digital currency by ASIC would add to recent moves to deal with digital currency by AUSTRAC and the Australian Taxation Office (ATO). This article argues that the time has come for Commonwealth regulation of digital currencies by ASIC as the relevant regulator. This would then trigger the obligations set out in the Corporations Act and the ASIC Act, including Australian Financial Services licensing, Australian Market licensing, standards of efficiency, honesty and fairness, disclosure provisions and possible market offences and corporate regulation generally. The suggested jurisdiction of ASIC would build on the existing role of ASIC, the ACCC, the ATO and AUSTRAC.
Keywords: digital currency, Bitcoin, financial product regulation, currency regulation
JEL Classification: K20, E42
Suggested Citation: Suggested Citation