The future of finance is digital, and blockchain is playing a pivotal role in this transformation. From blockchain-enabled cross-border payments to real-world asset (RWA) tokenization, the technology is driving operational efficiencies and opening up new avenues for value creation.
As a result, decentralized finance is projected to reach USD$601 billion by 2032. But innovation doesn’t happen in a vacuum. It thrives when clear, forward-thinking regulations are in place—and regulatory models come in many different shapes and sizes.
One country making headlines for its proposed novel approach is Australia. As the global financial ecosystem evolves, Australia’s proposed framework offers one example of how governments can regulate the digital economy while encouraging innovation.
The Dawn of a New Financial Era
Blockchain and digital assets are vital technologies powering a number of financial innovations including stablecoins, central bank digital currencies (CBDCs) and tokenized RWAs. They also play a key role in cross-border payments, a trillion dollar sector that has historically been plagued by high fees, delays and inefficiencies.
By reducing the number of intermediaries in the payment flow, blockchain-powered solutions like Ripple Payments can unlock real-time settlement and offer faster, more affordable and more transparent global payments, 24/7/365—effectively reshaping how money moves globally.
Real-world asset tokenization — another transformative use case for blockchain — is expected to grow to USD $16 trillion by 2030. Traditionally illiquid assets (real estate, art, carbon credits) are tokenized on a blockchain to provide liquidity, transparency, and accessibility to a broad range of investors.
Regulation is Key to Unlocking Blockchain’s Potential
With new use cases for blockchain and digital assets constantly emerging, the need for clear crypto regulation is critical for innovation to flourish. Regulatory ambiguity, on the other hand, breeds hesitation, creating uncertainty and slowing progress.
As Rahul Advani, Ripple’s Director of Policy for APAC, puts it: “If you’re a responsible innovator, you’re not looking at building for the next one, two or three months. You’re looking at building for the next five or ten years. And what regulatory clarity gives you is clear rules of the road so you know what to build.”
Countries like Switzerland and the United Arab Emirates have already positioned themselves as digital asset hubs by offering regulatory clarity that attracts businesses and investors. In fact, the UAE was one of the first countries in the world to consider blockchain applications at the government level. The UAE has been a pioneer in its commitment to crypto ever since, attracting top talent, capital, and infrastructure to the region.
The European Union’s Markets in Crypto-Assets Regulation (MiCA) is another example of a regulatory framework that can drive progress through legal certainty and unified rules across jurisdictions. MiCA provides straightforward parameters for crypto providers and issuers of money tokens to operate confidently within the EU, facilitating broader adoption and innovation. While Australia shares this overarching goal, it takes a different approach.
Australia’s Unique Regulatory Framework
Digital asset reform in Australia stands out for its focus on what digital assets do rather than what they are. While many countries are working to define whether a digital asset is a security, utility token or payment token, Australia’s framework emphasizes the function of these assets.
This activity-based approach aims to help regulators concentrate on the risks associated with how digital assets are used, sidestepping the ongoing debates around token taxonomy that have created regulatory delays elsewhere.
Australia’s government has proposed applying the existing Australian Financial Services License (AFSL) framework to digital asset service providers, ensuring that entities involved in activities such as digital asset custody are subject to the same oversight as traditional financial services. By using established regulatory infrastructure, Australia maintains consistency while allowing room to pilot new use cases in the rapidly evolving blockchain space.
That said, there are some concerns. While there has been substantial consultation over the past 5 years, Australia has struggled to make progress in finalizing a proposal for digital asset reform. This has led to a disconnect between Australia and international financial centers such as the European Union, Hong Kong, Japan, Singapore, and the United Arab Emirates, which have all provided clear regulatory frameworks for digital assets.
To remain competitive, it’s essential for Australian policymakers to not only engage with the industry, but to provide clear rules of the road for the industry to thrive. A proactive regulatory approach will not only safeguard investors, but also nurture an innovative ecosystem that attracts global talent and investment.
Building the Digital Asset Future
As the global financial landscape evolves, its focus on digital assets and blockchain infrastructure will only grow. Within this new reality, regulatory clarity is crucial to ensure and encourage responsible innovation, and Australia’s approach adds another important perspective to the conversation.
The country’s focus on regulating activities rather than defining assets provides a flexible framework that can adapt to a changing landscape without waiting for a global consensus on token classification.
Alongside other regulatory models, Australia’s approach can provide lessons for an aligned and integrated global regulatory infrastructure that ensures blockchain can develop as a sustainable, secure and beneficial technology for all. But the time to act is now.
Learn more about Ripple’s perspectives on regulatory frameworks for crypto and blockchain.
