Australia is making significant headway in the crypto space, setting the stage to become a major player in digital asset innovation within the Asia-Pacific region. Recent moves by Australian regulators underscore a commitment to fostering a competitive environment for cryptoasset development.
On September 18th, the Australian Securities and Investments Commission (ASIC) announced a provision for regulatory exemptions targeted at intermediaries involved in distributing Australian-issued stablecoins on secondary markets, provided these stablecoins originate from a licensed entity.
Australian law mandates that stablecoin creators secure an Australian financial services (AFS) license prior to public token offerings. Normally, crypto exchanges or similar entities distributing these stablecoins on secondary platforms would also require their own AFS license (or a similar type). However, the new exemptions remove this requirement, allowing distributors to operate without a separate license, contingent on providing clear and comprehensive disclosures to their customers regarding the listed stablecoins.
ASIC’s announcement highlights its belief that removing the need for intermediaries to hold extra licenses for listing stablecoins will spur digital asset market innovation. This approach aims to accelerate consumer access to stablecoins, allowing more market dynamism while ASIC works to create a long-term regulatory stablecoin structure. Currently, only one ASIC-approved stablecoin exists for Australian issuance – the AUDM, by Catena Digital. However, on September 25th, ASIC proposed expanding the exemption to include other approved stablecoins in the future.
In related news, on September 24th, the Australian government initiated a consultation on a suggested legal framework to regulate cryptoasset trading platforms and custodians handling tokenized assets. The consultation, ending on October 24th, involves crafting specific definitions for “digital asset” and “digital token”. This is designed to ensure comprehensive regulatory coverage, extending consumer protection, market conduct rules, and other critical requirements to crypto-related products that might currently be unregulated.
The proposed measures stipulate that Digital Asset Platforms (DAPs) and Tokenized Custody Platforms (TCPs) must obtain an AFS license and ASIC approval for specific services before operating within Australia. Currently, crypto exchanges and custodians only need to register for and adhere to anti-money laundering and counter-terrorism financing (AML/CFT) guidelines. The new measures will broaden supervision to encompass consumer protection and other essential aspects, enhancing consumer trust in these platforms and their security.
Previously, many within the Australian crypto industry have cautioned that the nation’s regulatory development pace has been slow, possibly jeopardizing its competitive edge, especially as regions like Hong Kong, Singapore, and South Korea have been swift in establishing regulatory frameworks. Whether these recent moves will bridge that gap is still uncertain, but they represent a meaningful stride in the right direction.
Hong Kong Issues Warning Regarding Unauthorized Stablecoins Backed by Yuan
Hong Kong’s monetary authorities are actively cautioning investors against unfounded claims on social media regarding yuan-backed stablecoins, underscoring the importance of regulatory adherence.
On September 25th, the South China Morning Post reported that the Hong Kong Monetary Authority (HKMA), the agency charged with overseeing Hong Kong’s stablecoin licensing and supervisory framework, used the WeChat platform to disseminate a warning to the public. This warning emphasized that no yuan-backed stablecoins have received HKMA approval for issuance in Hong Kong, contradicting some social media assertions that the HKMA has sanctioned yuan stablecoin trading.
Under Hong Kong’s stablecoin regulatory framework, issuers are required to secure a license from the HKMA before offering stablecoins to users within the region. They must also comply with stringent regulatory guidelines, covering areas such as AML/CFT protocols and sanctions compliance. While the HKMA has been operating a stablecoin sandbox allowing selected market participants to test their stablecoin concepts, it has not yet officially approved any stablecoins for issuance under its regulatory standards. The WeChat warning to investors indicates the HKMA’s concern that consumers might be misled and encouraged to invest in stablecoins lacking rigorous regulatory oversight, or which might be fraudulent.
The HKMA’s stablecoin regime forms a critical part of Hong Kong’s broader vision to establish itself as a prominent hub for digital assets and blockchain technology. For a more in-depth look, refer to our prior analysis here.
NYDFS Recommends Banks Embrace Blockchain Analytics for Risk Management
New York State’s chief financial regulator is advocating that banking institutions integrate blockchain analytics to strengthen financial crime risk management protocols.
On September 17th, Adrienne Harris, Superintendent of Financial Services at the New York Department of Financial Services (NYDFS), distributed a letter to New York banking organizations. Harris noted the increasing prevalence of banks within the state providing cryptoasset services and engaging in related activities, such as offering banking services to virtual asset service providers (VASPs). Consequently, as New York banks become more involved with cryptoassets, they will “play a critical role in safeguarding the integrity of the financial ecosystem” and must actively address financial crime risks encountered.
To this end, NYDFS expects banks to consider “leveraging blockchain analytics tools to enhance compliance programs and risk frameworks in a way that accommodates each Covered Institution’s risk appetite and business model.” The NYDFS letter includes specific examples of how banks might employ blockchain analytics for financial crime risk management, organized into three key categories:
- Verifying source of wealth/nature of business for clients who use crypto: When banks have clients whose source of wealth (SoW) or business activities involve proceeds from cryptoassets, or frequent cryptoasset transactions, banks may need to screen wallets on a risk-sensitive basis to verify client claims and assess potential risks.
- Entity due diligence: Banks that provide services to virtual asset service providers (VASPs) should assess the entity-level blockchain activity of those VASPs, or even activities across the broader cryptoasset ecosystem that impact their VASP clients.
- Developing the bank’s own financial crime risk assessment and risk appetite: A bank can employ blockchain analytics to quantify its indirect exposure to crypto-related risks (e.g., by holistically assessing the potential risks from VASPs or customers). When a bank intends to offer its own crypto-related products/services (e.g., custody), it can assess the direct exposure it would face. This analysis helps the bank determine if certain activities align with its risk appetite and design appropriate controls.
Furthermore, NYDFS recommends that New York banks consult its April 2022 guidance regarding blockchain analytics for financial crime risk management, which was designed for entities such as VASPs regulated under its BitLicense framework.
For a comprehensive overview of NYDFS’s expectations regarding blockchain analytics usage by banks, please see our full analysis here.
US Treasury Initiates GENIUS Act Rulemaking Process
In further developments concerning stablecoins, the US Department of the Treasury has formally begun the process of implementing the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, a key legislative achievement enacted this summer.
On September 18th, the Treasury published an Advanced Notice of Proposed Rule Making (ANPRM), soliciting public feedback on areas the Treasury should consider as it works to implement the GENIUS Act. Under the Act, the Treasury is tasked with creating and enforcing regulations that promote innovation in payments stablecoins, while also addressing financial crime risks and ensuring financial stability.
The ANPRM, which is open for comment until October 20th, presents several questions for public consideration on matters such as:
- Issuance and treatment of payment stablecoins, including defining terms like “payment stablecoin” and clarifying the scope of exemptions that the Treasury may provide to entities other than permitted payment stablecoin issuers (PPSIs).
- Requirements for issuing stablecoins, including the need for guidance clarifying reserved requirements for PPSIs under the Act, and the nature of acceptable custody arrangements for reserve assets.
- Illicit finance, including unique considerations for the Treasury when determining AML/CFT and sanctions requirements for PPSIs.
- Foreign payment stablecoin issuers, including criteria the Treasury should use to evaluate whether foreign regulatory frameworks for payment stablecoins are equivalent to the GENIUS Act.
Private sector input will significantly influence the implementing regulations the Treasury is mandated to publish by July 18, 2026 – a year after the GENIUS Act became law. A six-month period will then follow before the Act goes into effect on January 18, 2027, allowing PPSIs time to implement the final regulations.
In addition to the ANPRM, the Treasury also issued a separate request for comment on August 18th, seeking more detailed information on financial crime risks associated with stablecoins and how blockchain analytics and other technology solutions can facilitate innovative illicit activity detection.
For more information about the GENIUS Act, see our prior analysis here. For further details on the role of blockchain analytics in detecting illicit stablecoin activity, see here.
Bank of England’s Stablecoin Proposals Face Industry Backlash
The central bank of the United Kingdom is facing criticism from the private sector concerning its recent stablecoin proposals.
According to press reports from mid-September, cryptoasset industry participants in the UK are expressing concerns about the Bank of England’s (BoE) plan to limit the value of stablecoins individuals can hold. In November 2023, the BoE consulted on implementing the UK’s regulatory framework for stablecoins, under which the BoE will oversee stablecoins classified as systemic payment systems due to their potential impact on the stability of the UK’s financial system.
During that consultation, the BoE suggested capping individual stablecoin holdings between GBP 10,000 and GBP 20,000, at least during an initial phase after payment stablecoins are authorized. This is designed to allow the BoE to monitor the effect of stablecoins on credit availability from UK banks.
While the BoE and other UK bodies, such as the Financial Conduct Authority (FCA), are finalizing regulations for the stablecoin framework, slated for implementation in 2026, industry participants caution that these measures could hinder stablecoin innovation in the UK. This concern is heightened as the US, EU, Hong Kong, and other jurisdictions foster greater innovation in this sector.
In remarks to American Banker, Elliptic’s Head of EMEA Policy and Regulatory Affairs Mark Aruliah stated, “Although the Bank’s position may be well-meaning to address key risks such as monetary policy, market integrity and consumer protection, the clarity of this proposal is unclear and has the potential for operational complexity and costs to U.K. businesses.”
US and UK Commit to Digital Asset Policy and Regulatory Collaboration
In a related development, the UK and the US are joining forces to enhance cooperation regarding digital asset innovation.
On September 22nd, US Treasury Secretary Scott Bessent and UK Chancellor of the Exchequer Rachel Reeves announced the formation of the Transatlantic Taskforce for Markets of the Future, a collaborative effort to strengthen the US and UK’s positions as leading global financial centers. A critical aspect of the Taskforce will be fostering cooperation and deepening US-UK industry connections and investment in digital assets.
Within 180 days, the Taskforce, led by representatives from the UK’s HM Treasury and the US Treasury, will produce a report outlining short-to-medium term strategies for US-UK collaboration on digital assets amidst ongoing legislative and regulatory changes, along with exploring long-term collaborative opportunities.
The initiative will actively engage with digital asset sector representatives from both countries, gathering input on policy and regulatory measures that promote mutual investment and innovation. Recently, UK cryptoasset industry participants have proposed creating a “Tech Bridge” to facilitate stablecoin usage between the two nations. Elliptic’s Mark Aruliah, contrasting with the BoE’s stablecoin proposals, told CoinDesk that the Taskforce’s creation “signals a strong intent to . . .position the UK more competitively” on digital assets.
This initiative comes as the US Senate debates comprehensive digital asset market structure legislation, seen by industry participants as vital for solidifying US leadership in digital assets. Meanwhile, the UK’s FCA is executing its own cryptoasset roadmap to establish a more thorough regulatory framework for digital asset service providers.
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