Design distribution obligations refer to the responsibilities placed on issuers and distributors of financial products, including digital assets, to ensure these products are appropriate for their target market. These duties require careful consideration of the product’s characteristics, potential risks, and the specific needs of the investors it is intended for. The aim is to prevent mis-selling and protect consumers by ensuring products align with investor profiles. This concept promotes responsible product governance throughout the lifecycle of an asset.
Context
Design distribution obligations are gaining prominence in the digital asset regulatory landscape, particularly with new frameworks seeking to apply consumer protection principles to crypto products. The current focus is on how these obligations apply to novel decentralized structures and the role of various actors within the ecosystem. A key debate centers on defining the “target market” for various digital assets and the practical challenges of enforcing these requirements in a globally accessible, permissionless environment. Future regulatory guidance will likely clarify the scope and application of these duties for crypto-asset issuers.
The proposed Corporations Amendment Bill subjects digital asset and tokenized custody platforms to full Australian Financial Services (AFS) licensing and conduct obligations.
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