In essence, the Australian federal government is moving forward with plans to introduce regulations for the digital asset sector at the exchange level. This means that there's a possibility that cryptocurrency exchanges may soon be required to hold a financial services licence issued by the local financial regulator.
In a recently unveiled document titled 'Regulating digital asset platforms,' the Australian Treasury outlined that the new regulatory framework is designed to address issues affecting consumers while still supporting innovation within the digital asset sector.
The core focus of this regulatory framework is to oversee cryptocurrency exchanges and service providers rather than individual cryptocurrencies or tokens themselves. The document also clarified that existing financial services laws would be employed to regulate crypto exchanges, rather than creating new rules specifically for cryptocurrencies.
According to the proposed rules, any crypto exchange holding assets exceeding USD 3.2 million (AUD 5 million) or USD 946 (AUD 1,500) per individual would be required to obtain a license from the Australian Securities and Investment Commission (ASIC).
The reaction from crypto exchanges operating in Australia has been mixed. For instance, Swyftx's general counsel commended the proposal as 'thoughtful' and stressed the importance of ensuring cryptocurrency users have access to blockchain technology with appropriate protections, while still allowing room for innovation.
On the other hand, officials from Kraken Australia expressed disappointment with the approach, characterising it as an attempt to fit crypto into existing financial services regulation. They also noted that Australia has fallen behind global peers in establishing a crypto framework.
Partners from international law firm Clyde & Co pointed out that the Treasury appears to be grappling with the various types of tokens and service providers in the industry. They pointed out that the proposals in the consultation paper are suggestions and not legally binding recommendations.
They also mentioned that the consultation paper might not adequately address the most pressing issues facing the crypto industry in Australia, such as the recent debanking of many licensed digital asset exchanges, both domestic and international. These exchanges are encountering challenges in securing appropriate banking arrangements.
It's worth noting that the Treasury's primary objective with the consultation paper is to collect feedback on the proposed regulations and questions contained therein. Stakeholders can submit their feedback by 1 December 2023.
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