ASIC compares Bitcoin to cigarettes amid regulatory debate

The Australian Securities and Investments Commission (ASIC) is facing backlash after its Digital Assets Lead, Rhys Bollen, made controversial remarks comparing Bitcoin to cigarettes used as currency in prisons. 

This statement came during a liaison meeting discussing initial feedback on a consultation paper related to proposed regulations for digital assets.

Bollen's analogy arose while addressing questions about applying Non-Cash Payment Facility (NCP) legislation to digital currencies. 

An NCP includes payment methods that do not involve physical cash, such as digital wallets and cryptocurrencies. 

Bollen explained that if a product is marketed as having payment capabilities, it could trigger NCP classification. 

“In theory, almost anything could potentially be used to make a payment to another person. You know, cigarettes are used in prisons as a way of making payments,” he stated. 

His comments have raised concerns within the crypto industry regarding the implications of such regulatory interpretations.

Industry leaders worry that applying stringent financial regulations to tools like non-custodial wallets could stifle innovation and push businesses out of Australia.

Michaela Juric, general manager of the Australian stablecoin project AUDD, criticised ASIC's view, stating that it sets a dangerous precedent for widely used crypto tools like MetaMask.

“If one of the primary functions of MetaMask is to allow the user to send and receive payments, then this interpretation by ASIC may result in MetaMask needing to obtain an AFSL to offer its services to Australian users,” Juric explained.

Earlier this month, ASIC released a consultation paper proposing updates to its regulatory guidance on digital assets. 

The paper includes 13 examples illustrating how digital assets might qualify as financial products under the Corporations Act.

As Australia tightens its grip on cryptocurrency regulation, public feedback on the consultation paper remains open until February 2025, with finalised guidance expected later that year. 

At the time of reporting, the Bitcoin price was $100,671.