The corporate watchdog has said it wants industry leaders to drive safe AI adoption in lending, but under clearer rules.
ASIC chair Joe Longo has urged lenders, aggregators, and other market leaders to take an active role in shaping the development and rollout of artificial intelligence across financial services, warning that AI‑enabled tools would become increasingly widespread in the coming years.
Speaking at the Asia Securities Industry & Financial Markets Association (ASIFMA) conference in Sydney on Thursday (5 March), Longo said the corporate regulator wanted to be seen as a sponsor of innovation.
He told the conference that ASIC “supports open, robust, and competitive markets – where new innovations can compete for market share,” adding that the regulator “wants to be backers, not blockers, of financial innovation.”
From sandbox to a viable AI roadmap
A core theme of Longo’s speech was that the current framework for AI‑driven advice and credit tools did provide a smooth path into the mainstream licensing regime.
He identified the transition from regulatory sandbox to full licence as a key pain point for start‑ups and emerging advice technologies.
“We’re also interested in exploring how we can better support start-ups with pathways from regulatory sandbox to licensing,” Longo said.
The regulator is currently assisting an independent review of the government’s enhanced regulatory sandbox to assess “how well it supports financial innovation compared to international peers, like Singapore and the UK.”
Longo said feedback from firms using the sandbox – and from the government’s separate review – had been clear and consistent.
“One of the primary concerns we heard is about the pathway from sandbox to licensing: it needs to be far clearer, with more options,” he said.
He said the gap had real consequences for emerging AI‑enabled tools, which may be viable in a controlled pilot, yet struggle to survive the jump into a fully licensed environment.
“In the last five years, very few sandbox participants have successfully made this transition,” he said.
“What happens is many get to the end of the testing period and face a cliff: full licence or stop operating. There’s no in between.”
A more structured journey for AI tools
To address that, Longo floated a more hands‑on model in which ASIC would closely engage with innovators throughout their testing journey, particularly those trialling AI in advice and credit decisioning.
He asked the audience to “imagine a potential model where a start-up enters the regulatory sandbox to test an AI-driven financial advice tool”.
“From day one, ASIC briefs them on the broader regulatory regime, including the licences available for financial and credit services. ASIC assigns the start-up a ‘case manager’ to help them personally navigate the experience,” he said.
He said in this proposed approach, the question of what came after the sandbox was not left until the last minute.
Longo also said ASIC would look to open that conversation well before the testing period ended.
“At the end of year one, and a year before testing is over, they meet with ASIC to discuss their ‘exit strategy’. Do they intend to apply for a licence – and perhaps need relief to facilitate their transition?” he said.
“Or will they become a representative of an existing licensee, sell their business into a bigger licensed firm or wind up because testing hasn’t demonstrated commercial viability?”
Longo said that giving innovators multiple pathways and clear expectations from the outset would reduce the risk that promising AI tools “fall off the cliff” when sandbox relief expires.
Regulation as an enabler
Longo framed these changes as part of a broader shift to make regulation a positive force for innovation.
He said ASIC was “taking the lead to bring industry and experts together on the ecosystem-level around innovation.”
He singled out financial market infrastructure and asset tokenisation as areas where that collaboration was already visible.
Longo highlighted the regulator’s involvement in the Reserve Bank’s Project Acacia and its licensing of tokenised trading platforms as examples of how experimentation was being guided within existing legal frameworks.
Longo stressed that this work, while focused on wholesale and institutional markets, ultimately flowed through to how credit was funded and eventually to the pricing and product options available to borrowers.
“Tokenisation at scale will require the co-operation and co-ordinated efforts of buy and sell side participants, market infrastructure and service providers, and policymakers and regulators,” he said.
He also pointed to ASIC’s recent steps to clarify the treatment of digital assets under existing law as evidence that regulation could underpin new technology.
ASIC calls for leadership on AI and innovation
Throughout the speech, Longo reiterated that innovation at scale, whether in AI or other emerging technologies, could not be left to regulators alone.
Longo called for “fresh thinking” and “smart risk-taking” from market participants, alongside tighter collaboration with policymakers and supervisors.
“We need collaboration across the private and public sector, and for boards and executives to play a strong role in driving innovation,” he said.
For lenders, aggregators, and other large licence holders, ASIC’s message is that AI‑enabled tools are set to become more embedded in how advice is given, credit is assessed, and funding markets operate.
Yet Longo stressed that ASIC expected these tools to be supported by solid governance, clear licensing pathways, and early engagement with the regulator.
[Related: Speed over strategy: Why brokers risk missing AI’s bigger opportunity]
