ASIC Jumps Into Action with Fintech Regulation

Starting last week and continuing this week, Australia is seeing a light into the new economy, now that the “resources boom is over” (have we heard this enough already?).

The Treasurer, Scott Morrison, has announced a new “regulatory sandpit” for fintech startups to play in.

On Monday, ASIC bounced back to life, issuing in quick succession long overdue guidance on the hot topics of robo-advice and peer-to-peer lending. ASIC’s long overdue guidance paralleled the government’s release of a 35-page report titled ‘Backing Australian FinTech’ that accompanied a statement from Treasurer, Scott Morrison.

For those of us working as advisors to get businesses properly regulated (in financial services that means obtaining an Australian Financial Services Licence (“AFSL”) and for credit providers this means an Australian Credit Licence (“ACL”)) every day of the week, the guidance is nothing new – just a more formal version of what has been gleaned over the past few years of trying to assist innovative clients start their businesses.

What’s missing so far in this puzzle is better Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term. The cost to start up a peer-to-peer lending platform by following ASIC’s now-published interpretation of the Corporations Act, by rough estimates is close to AUD 500,000. That’s the up-front regulatory cost, and doesn’t include the cost of developing the platform or website. Your annual ongoing costs from a regulatory standpoint are at least half that. It’s a lot of money to sink into an idea.

Entrepreneurs grow weary and disillusioned

Instead of tackling the Corporations Act and making it more workable, the Australian government has simply declared that it wants a moratorium on its implementation while businesses get started.

ASIC has snapped to attention as a result (can you imagine the emails last week to senior staff pushing them to get this guidance out ASAP?) and in my view is subtly stating its case that it doesn’t want to lose the grip it has on innovation – that being, the grip which seems to be stifling new business and innovation.

Have you tried to get an AFSL or ACL for your new business lately? Businesses are struggling – ASIC won’t let many of them through the system often because they don’t understand the business or don’t want to be the person to rubber stamp something that might go wrong.

ASIC’s analysts are struggling – they write back and say they have a huge workload and will respond in 14 days, or 28 days, or whenever they get around to it. Entrepreneurs grow weary and disillusioned.

Our clients want to be first to market with Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term, automated advice platforms, lending solutions – ASIC freezes and lets the incumbents dominate instead – so banks are implementing blockchain because they already have the right AFSL to do so, but people who want to bring the benefits of blockchain to the masses are stalled until this week when their AFSL came back suddenly with no further questions – great news but is it sustainable?

Businesses looking to offer credit in a cheaper and more innovative way are not let out of the starting blocks for fear credit will get into the wrong hands and that they will become the regulator that caused the second (or third?) Global Financial Crisis.

I’m excited to see what the regulatory sandpit looks like. But I’m already scared of what happens to those who are too big to play in the sandpit anymore.

Is the Australian Government kicking the problem down the road? We might now have the opportunity to plant the seeds of good businesses off the ground, but will we let them thrive in 2 or 3 years, when they have to join the AFSL or ACL queue?