Response to a request to comment on an ASIC inquiry into the regulation of digital assets. With Darcy Allen. Available in PDF here.
Summary: Today we are living through a deep shift in our digital economic institutions. Crypto and digital assets might look like an isolated example, but they underpin a broader stack of innovations and technological trajectories. We have written widely about the opportunities from artificial intelligence, advanced cryptography and the low earth orbit economy. Each of these technologies are reshaping markets and spawning new industries. A diversity of digital assets will play an important role in accelerating, funding and governing their development.
In the absence of legislative clarity — or even non-binding guidance clarity — Australians will not capture these opportunities. We are not raising some hypothetical concern. While Australia debates how a regulator might interpret traditional financial law for crypto assets, other nations are establishing clear, forward-looking regulatory frameworks. The risk is not just that Australia will fall behind — we have already done that — it is that our approach is destined to become obsolete in real time.
We conclude that:
- Guidance is a poor substitute for clear legislation and that ASIC should use their position to advocate for timely, clear legislation.
- There are fundamental limits on regulatory enforcement in a permissionless, decentralised, global and open economy.
- Trying to squeeze digital assets into existing regulatory frameworks distorts the economy and incentivises regulatory arbitrage.
- Investors in digital assets have specific needs that have not been contemplated by current practices under the Corporations Act.