Urszula McCormack, Dale Rayner, Max Allan, Shannon Hatheier and Emily Fox look at key fintech developments, from crypto licensing in Australia to stablecoin regulation in Hong Kong.
As another transformative year comes to an end, what can we expect in 2025? In our latest update, we widen our usual lens on central bank digital currencies (CBDCs) to capture highlights across the fintech landscape.
In Australia, the digital assets industry is focused on considering the Australian Securities and Investments Commission’s (ASIC) important new guidance and proposed approach to licensing digital asset businesses. Hong Kong introduced a landmark legislative framework for stablecoin regulation, while six spot virtual asset exchange traded funds (ETFs) were listed. Global efforts towards CBDCs were spearheaded by the Bank for International Settlements (BIS), as it handed over its landmark multi-CBDC project to speed up and secure cross-border payments to central banks and monetary authorities.
Several deals highlighted the continuing innovation in blockchain technology and digital assets. And crypto markets rose after the year-end news of US President-elect Donald Trump’s intention to appoint Token Alliance co-chair Paul Atkins to lead the Securities and Exchange Commission.
What are your highlights as 2024 ends? Share what you’re seeing with your KWM contact. We’ll see you in 2025.
What we heard…
‘A good regulator is one that is always looking forward. I think regulators recognise that there are a lot of benefits from a lot of the innovation that’s coming – it’s a matter of, how do you then fit that within your mandate?’ Greg Medcraft, Global Digital Finance co-chair (read on for more!)
Regulatory updates and market trends
Digital assets
- Australia’s crypto-licensing evolves: First, significant news landed in December (and businesses can have a say): ASIC announced updates that could reshape the digital asset landscape in Australia. This revises ASIC’s existing guidance and clarifies its position on the application of Australian financial services laws to digital assets in Australia, taking into account an evolution of the market since ASIC last published guidance. These impact businesses offering crypto and digital asset services in respect of assets that are financial products, or which otherwise involve the provision of financial services, under the Corporations Act 2001 (Cth). The draft updated guidance sets out ASIC’s position on the regulatory characterisation of various token types and crypto services, and its approach to licensing, including a potential no-action window. Feedback from the industry is invited by 28 February 2025, offering a chance to influence the final guidelines – as Urszula McCormack, Dale Rayner, Max Allan, Nelda Turnbull and Jazz Osvald explain.
- Spotlight on crypto tax avoiders: Businesses can also give views on how Australia applies the OECD’s Crypto Asset Reporting Framework (CARF), giving tax authorities the power to collect and share relevant crypto asset ownership information, up until January 24. As Judith Taylor, Sylvester Urban and Krisha Reddy explain, the proposed anti-tax evasion laws are expected to start from 2026 with global information exchanges between tax authorities potentially starting by 2027.
- Digital asset custody: ASIC has published guidance on its regulatory expectations for digital asset custody, in an update to its foundational tome, Regulatory Guide (RG) 133.
- AML/CTF changes in Australia: Australia is also preparing for a significant uplift to its anti-money laundering and counter-terrorism financing regime following the passage of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Bill 2024 through Parliament. Among other things, the reforms will expand the regulation of virtual assets and extend the regime to certain higher risk services provided by ‘tranche two’ entities including lawyers, accountants and real estate agents. Most reforms are not due to commence until March 2026.
- In Hong Kong, bold stablecoin moves: The long-awaited Stablecoins Bill was published on December 6, bringing it closer to ambitions to become a global digital asset centre. The bill sets out a comprehensive licensing framework for fiat-referenced stablecoin issuers and grants the Hong Kong Monetary authority (HKMA) necessary powers for supervision, investigation and enforcement. The pivotal development follows a consultation period that began in December 2023 and will be introduced into the Legislative Council for the first reading on 18 December 2024. The HKMA is already advancing with a sandbox for stablecoin issuers, aiming to bolster Hong Kong’s position as a secure and dynamic hub for virtual assets and Web3 services. Richard Mazzochi, Minny Siu, Andrew Fei and Urszula McCormack explain.
- Virtual asset trading platform (VATP) licensing regime progresses: The VATP moved into the ‘deemed-to-be-licensed’ phase in June 2024. As Urszula McCormack and Nikita Ajwani explain, the Securities and Futures Commission (SFC) maintains a Public Register and monitors for suspicious platforms. Key stakeholders, including unlicensed VATPs, banks, and advertisers, must navigate this regulatory landscape carefully, ensuring compliance to avoid legal repercussions. We released our handy get-ready checklist back in 2023 – you can find it on KWM Pulse here.
- Virtual asset ETFs in Hong Kong: In a landmark move for Hong Kong’s financial sector, six spot virtual asset ETFs, including Bitcoin and Ethereum ETFs, were listed on the Hong Kong Stock Exchange. This follows the Securities and Futures Commission’s (SFC) December 2023 circular, signalling a willingness to authorise funds with virtual asset exposure. This initiative positions Hong Kong as a burgeoning digital asset hub and underscores its status as a global f inancial leader embracing virtual asset investments. Led by Cindy Shek and supported by Richard Mazzochi, Minny Siu and Andrew Fei, KWM advised BOCI-Prudential Trustee Limited, the custodian for these pioneering ETFs.
- Global crypto regulation efforts: In the UK, the Financial Conduct Authority published a roadmap for the development of crypto regulation, as it released data showing more than one in ten people owned crypto. In Europe, it’s all about consistency as the three supervisory authorities across the EU published joint guidelines for regulating crypto-assets, including classification.
Central Bank Digital Currencies (CBDCs)
- Digital currency revolution in Australia: The Reserve Bank of Australia (RBA) and Treasury unveiled a roadmap for CBDC research. This promises to modernise Australia’s monetary system for the digital era, potentially enhancing efficiency and cross-border transactions, while the world watches its pioneering steps in the financial frontier. By the second half of 2025, expect insights from Project Acacia on wholesale digital money, and in 2027, a pivotal paper on retail CBDC will outline potential impacts and use cases. These milestones are key to potentially reshaping Australia’s financial landscape, as Max Allan, Urszula McCormack, Ian Paterson, Dale Rayner, Heidi Machin, Jazz Osvald and Layton Hubble write.
‘At the present time, we assess the benefits to the economy as more promising, and the challenges less problematic, for a wholesale CBDC compared to a retail version. This recognises that unlike a retail CBDC that would be issued for use among the public, a wholesale CBDC would represent more an evolution than revolution in our monetary arrangements.’ Reserve Bank of Australia Assistant Governor (Financial System) Brad Jones
- CBDC innovation in Japan and Europe: Transformative shifts continue across the global digital currency landscape. The Bank of Japan is developing its digital yen after reporting on its pilot program this year, inspired by the 2023 efforts of the Bank of England with BIS to build functions to support the private sector and consider use cases (Project Rosalind). In other developments since our last CBDC update, the European Central Bank (ECB) is working with banks, fintechs and other stakeholders to test conditional payments and innovative use cases for a digital Euro. An outcome report is due mid-2025. The ECB also published its second progress report in December as it works towards the ‘possible issuance of a digital euro’. The ECB is one of seven central banks that have worked with BIS for almost five years to explore CBDCs. The group published its latest papers, summarising the legal and system design aspects of a retail CBDC (none of the members have introduced one), in November.
Payment systems and consumer rights
- Regulation widens in Australia: In other landmark news down under, changes that would allow the central bank and Federal Treasurer to regulate a wider range of payment systems are still in the Senate. For an explainer on the new powers and what they mean, read this insight from Diana Nicholson, Kate Jackson-Maynes, Dale Rayner, Max Allan, Urszula McCormack and Sam Farrell.
- Changes tabled for Australia’s credit reporting framework: The much-anticipated report from the independent review of Australia’s credit reporting framework was released on September 30. The review, conducted by former Australian Prudential Regulation Authority senior executive Heidi Richards, made 37 recommendations including many that – to quote the report – ‘will require substantive changes to the law which will be complicated and have flow on implications for credit bureaus, credit providers, regulators and consumers’.
- Enhancing consumer rights: Plans to encourage greater use of the consumer data right (CDR) scheme in Australia are under consultation with Treasury. The changes aim to enhance competition, facilitate easier switching for customers and address concerns raised by banks. Consultation closes on December 24. In related news, consultations on consent and operational enhancement have closed in September.
‘[W]e need to ensure the CDR is consumer‑focused and delivering genuine value. This is why I want to focus on unlocking use cases that consumers want and find valuable. Consumer finance and borrowing is at the top of the list.’ Assistant Treasurer and Minister for Financial Services Stephen Jones, speaking at the Intersekt FinTech Festival in September
Deals and transactions
- Ant Digital Technologies, a leader in blockchain, privacy computing, IoT and AI-trusted tech, executed a cross-border, e-CNY-denominated tokenised financing transaction. The deal, advised by KWM under multiple jurisdictions, is part of HKMA’s Project Ensemble Sandbox. The sandbox explores tokenised asset transactions in real business settings.
- InDebted, a global debt collection fintech, successfully raised $60 million in a Series C capital raise, valuing the company at over $350 million. Led by Airtree and supported by various investors, the funding will aid expansion into new markets and the development of products and solutions. InDebted is known for its personalised debt collection approach powered by technology. Santander CIB acted as the exclusive financial advisor for the transaction and KWM provided legal advice.
Fintech conversations with global experts
- KWM Digital Future Summit highlights: We were honoured to host Global Digital Finance (GDF) co-chair and former Australian securities regulator Greg Medcraft at our KWM Digital Future Summit in late 2024. Greg shared how the GDF is working to standardise global payments and the trends shaping the space. Crypto.com CEO Kris Marszalek and Global Risk Strategist Jessica Mila Schutzman also joined for front-row-seat insights on the state of crypto and privacy risks (respectively). Watch Urszula McCormack in conversation with this trio of industry leaders here.
- Talking tokenisation: In other conversations, KWM banking partner Andrew Fei 费 and Ant Digital Technologies regional head of RWA Daisy Yu Sang met to talk tokenisation. Understanding the distinctions between security tokens, utility tokens and NFTs is crucial for navigating the digital asset landscape. Each token type has unique regulatory implications based on its characteristics, not just its label. This knowledge helps ensure compliance and informed decision-making in the evolving world of digital assets. Watch Andrew’s explanation in this LinkedIn post.
That’s all for this update! We are involved in several projects, and we love nothing more than helping our clients experiment, build new infrastructure and drive innovation. Subscribe to KWM Pulse using the button below for more. Stay on top of the latest regulatory developments via our global Digital Payments and Virtual Assets page.
We’ll leave you with a fun fact…
The first Fintech company was founded in 1911 – Western Union, introducing the first electronic money transfer service.
