ASIC has issued ASIC Corporations (Stablecoin Distribution Exemption) Instrument 2025/631 which will allow distributors to exchange, settle or deal in certain specified stablecoins issued by an AFSL licensed issuer, without obtaining their own AFSL, markets or clearing and settlement licence. Currently, this relief extends only to one licensed stablecoin issuer. However, ASIC expects to exempt additional issuers as they become regulated. The instrument does not provide relief in relation to any widely traded stablecoins listed for trading on international or Australian exchanges or payments platforms.
The fine print
Under the ASIC instrument, and until 1 June 2028, a Distributor of a Named Stablecoin is temporarily exempt from the following licensing obligations, but only in relation to dealings involving the named stablecoin (and not any other dealings involving other cryptocurrencies):
- Requiring an Australian market licence to operate a financial market in Australia.
- Requiring a licence to operate a clearing and settlement (CS) facility.
- Requiring an AFSL to carry on a financial service involving advice, dealing, making a market or custodial or depository services.
The first specified stablecoin under the instrument is AUDM issued by Catena Digital Pty Ltd. AUDM is stated to be a fully fiat-collateralised, backed with AUD reserves held in trust at a major Australian bank.
The instrument requires that Distributors relying on these exemptions must take reasonable steps to provide or make available to retail clients the most current Product Disclosure Statement.
The targeted relief will take effect once registered on the Federal Registration of Legislation. ASIC has indicated that it will extend the relief to other issuers as they obtain AFSL licensing.
Pathway or byway?
ASIC’s proposal to license stablecoins and provide targeted relief presents a potential pathway to compliance for stablecoin issuers and distributors and is expected to allow a market in licensed stablecoins to develop pending further regulatory reforms (including a proposal to introduce tailored payment stablecoin legislation). The instrument is intended to expire in 2028. However, more work remains to be done to establish a comprehensive and fit for purpose licensing framework for payment stablecoin issuers.
The tailored licence conditions which apply to licensed issuers (e.g. reserve and redemption requirements) and any product disclosure requirements have not been released to date. Further details will be required to assess the impact on innovation and consumer protection, the pathway to compliance for other issuers, and inform consumers of the additional checks and balances that will apply to licensed issuers.
The relief is also subject to a number of important limitations. It does not address many stablecoins which are in market and widely distributed. These stablecoins will remain in a regulatory grey zone until such time as the issuer obtains licensing and relief through ASIC or a future payment stablecoin framework comes into place. Further, while distributors will not need a license to deal with named stablecoins for fiat to crypto transactions, in practice, they may still require licensing to deal in cryptocurrency pairs involving a named stablecoin. This likely limits the practical scope of the relief. A licence may still be required for payments related applications.
In recent times, ASIC has issued recent guidance stating that it regards a number of widely traded cryptocurrencies as financial products, without specifying which ones are financial products and which ones are not. Businesses dealing in cryptocurrencies are therefore encouraged to seek legal advice on their licensing obligations. In Consultation Paper 381, which proposed updates to ASIC guidance on crypto-assets contained in Information Sheet 225, ASIC indicated its current view that certain stablecoins may be financial products depending on their features and invited industry feedback. A finalised version of the updated guidance has not yet been published. Accordingly, prevailing uncertainty remains as to the application of the existing law to cryptographic tokens including stablecoins. However, ASIC’s clear preference appears to be that stablecoin issuers pursue licensing under the existing AFSL framework pending further legislative reforms.
Conclusion
ASIC has dubbed the relief a pro-innovation move. The relief represents a positive step to support digital asset innovation and could open a conversation on how ASIC may effectively use its regulatory relief powers more broadly to support innovation generally, including regulatory clarity and transitional relief as Australia moves toward fit-for-purposes digital assets regulations. It is consistent with recent Government and regulatory efforts to provide a pathway to support responsible innovation in the financial sector and digital assts more broadly.
