April 19, 2024
Australia's Crypto Regulations: A Shift Towards Exchange-Level Oversight
Policy & Regulation

Australia’s Crypto Regulations: A Shift Towards Exchange-Level Oversight

With measures to regulate the digital asset industry at the exchange level moving forward, the Australian federal government may soon demand that cryptocurrency exchanges possess a financial services license provided by the regional financial regulator.

The Australian Treasury stated that the recently published “Regulating digital asset platforms” consultation document, launched on Oct. 16, intends to address consumer harms while also fostering innovation in the digital asset industry.

The new regulatory framework’s central idea is that it seeks to govern cryptocurrency exchanges and service providers rather than specific cryptocurrencies or tokens. The consultation document also stated that rather than creating new crypto-specific regulations, it will regulate cryptocurrency exchanges following current financial services legislation.

ASIC would require any cryptocurrency exchange that has more than $3.2 million (AUD 5 million), or more than $946 (AUD 1,500), per person, to apply for a license under the new proposed regulations.

The plan has received a range of responses from Australian-based cryptocurrency exchanges.

Adam Percy, the general counsel for Australian cryptocurrency exchange Swyftx, described the plan as “thoughtful” and concurred that “the primary focus should be to make sure cryptocurrency users can access blockchain technology with appropriate protections and that there’s room for innovation.”

However, Jonathon Miller, director of Kraken Australia, expressed his dissatisfaction with the most recent developments, claiming that the consultation document was simply “shoehorning” cryptocurrency in with the rules already in place for financial services.

“Australia is now in the unfortunate situation where our regulation has taken a very long time, so we’re taking the approach of shoehorning crypto into existing financial services regulation,” Miller stated. “We’re behind our global peers when it comes to implementing a crypto framework, so I appreciate the need to have something in place locally to provide certainty to platforms like ours.”

“I’m hopeful that we can work collaboratively with the Government to make sure we don’t snuff out the benefits of future innovations in crypto that might fall outside the conventional ‘financial services’ box.”

Jonathon Miller, director of Kraken Australia

While it’s obvious that the Treasury is still “grappling” with all of the various token types and service providers, Liam Hennessy, partner at the global law firm Clyde & Co, said that it’s important to keep in mind that all new proposals laid out in the consultation paper remain only suggestions and aren’t legally enforceable suggestions.

“Whatever the Treasury suggests, it is just that — a suggestion only. The Government is not bound to follow its recommendations, and there will be lobbying once the consultation paper comes out.”

Liam Hennessy, partner at the global law firm Clyde & Co

Hennessy stated that the consultation document may not adequately address some of the most immediate problems the Australian crypto business is now facing, such as the recent wave of debanking.

“Many licensed digital assets exchanges, both domestic and international, are struggling to find adequate banking arrangements,” stated Hennessy.

Notably, the Treasury stated that the consultation paper’s main purpose is to “seek feedback” on the several questions and rules that are suggested within, and it suggested that any response may be sent by December 1, 2023.

Image: Wallpapers.com

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