Cryptocurrency exchanges will need to need to hold an Australian financial services licence (AFSL) under plans to regulate the sector from the federal government.
A proposal paper on regulating the sector has been released by Treasury for feedback by December 1.
The government wants to use existing financial services laws with threshold triggers, including an exchange holding $5 million in digital assets and/or $1,500 for an individual.
Like other regulated financial providers, the exchanges would need to meet solvency and cash reserve requirements, submit financial records to the regulator and a effectively deal with disputes.
The digital assets industry would also need to meet minimum standard for contracts, holding and transacting tokens and custody software, as well as addressing a range of risk management issues
Announcing the long-awaited plans, federal treasurer Jim Chalmers and assistant treasurer Stephen Jones said the proposals have been designed to ensure they are consistent with other jurisdictions, and seek to reduce the risk of these collapses by lifting the standard of the operation of platforms and increasing oversight.
Swinburne financial technologies expert Dr Dimitrios Salampasis
“This framework has been marked by numerous and often unnecessary delays, which have been quite detrimental both for the industry and the users,” he said.
Australia is already way behind compared to other jurisdictions in relation to putting together crypto regulatory frameworks, raising questions about Australia’s international competitiveness.”
NSW Liberal Senator Andrew Bragg, who’d laid the groundwork for regulation by 2022 before the Coalition lost the election in May last year, said announcement concedes there will be no crypto laws in the first term of the Labor government.
“The Coalition announced this policy almost two years ago. Rather than implementing the policy, the Government has been goofing around, and solely prioritising the laundry list of reforms sought by unions and super funds,” he said.
“The Proposal Paper recognises the need for crypto regulation to protect consumers. But Labor has locked Australia into the slow lane on crypto reform.”
Senator Bragg said the government’s plan is largely a rehash of the 2022 paper, ‘Crypto asset secondary service providers: Licensing and custody requirements’
“After 18 months in the job, Minister Jones hasn’t even developed a draft bill. Instead, he is re-releasing a consultation paper that was first released on 21 March 2022,” he said.
Crypto consumers will continue to be exposed to an unregulated market until these proposals become law. Until then, Labor and Minister Jones are exposing Australians to an unregulated market.”
Australian Banking Association (ABA) CEO Anna Bligh hailed the plans as a “very welcome step in the fight against scams”, describing crypto as “the getaway vehicle of choice” for scammers.
“This is good news for consumers who are under relentless attack from scammers hell-bent on serving up ever more complex and cunning scam,” she said.
“A rigorous licensing system for the crypto industry will mean greater oversight. The changes will also help banks and customers ensure money is only transferred to reputable crypto operators that are subject to strict rules and regulator enforcement action.”
Caroline Bowler, CEO of BTC Markets called the announcement a “positive progression for the crypto industry.
“Digital assets are so clearly the future of financial services. It is imperative the country keeps pace with our international peers, with a robust regulatory framework,” she said.
“BTC Markets has long agitated for appropriate, proportional regulation of the crypto industry in Australia. This includes holding an AFSL under our sister company, BTCM Payments, since 2022.
“We share the desire for widespread investor protections. Mirroring traditional financial products will give investors similar comforts when they trade crypto or other digital assets.”
Swyftx General Counsel Adam Percy said they’d like to see a level playing field for national and overseas crypto platforms.
“It is important to have clear rules and guidance in areas like segregation of customer assets, custody and advice so that if you want to compete on these shores, you compete to Australian standards and local crypto users are properly protected,” he said.
“This is an important step because Australia will benefit from a secure and vibrant blockchain sector. .”