Australia is moving towards stricter oversight of companies offering cryptocurrency services. New proposed laws aim to bring crypto exchanges under the same regulatory umbrella as traditional financial institutions.
Speaking at a digital currency conference on Thursday, Assistant Treasurer Daniel Mulino described the draft legislation as “the central pillar of our digital asset strategy.” The Albanese Government initially unveiled this strategy in March.
“This initial version of the legislation is now available, and we are actively soliciting feedback from stakeholders to ensure its effectiveness and clarity,” Mulino stated.
Currently, crypto exchanges that solely facilitate the trading of digital currencies like Bitcoin (BTC) are only required to register with the Australian Transaction Reports and Analysis Centre (AUSTRAC). AUSTRAC reports having approximately 400 registered crypto exchanges, many of which are not currently active.
Proposed Law Introduces Two New Financial Categories
Mulino explained that the draft legislation will establish two new types of financial products under the Corporations Act: “digital asset platforms” and “tokenized custody platforms.”
“This will require providers of services relating to digital asset platforms and tokenized custody platforms to obtain an Australian Financial Services License,” he elaborated.
This license would mandate registration of all exchanges with the Australian Securities and Investments Commission (ASIC). Currently, only exchanges dealing in “financial products,” such as derivatives, are required to register with ASIC.
Mulino further noted that the legislation includes “specific regulations for key activities,” including wrapped tokens, public token infrastructure, and staking activities.
Crypto platforms will also be required to adhere to “a set of obligations designed to address the unique characteristics of digital assets,” including standards for secure crypto asset holding and efficient transaction settlement, according to Mulino.
“The failures we’ve seen in the digital asset sector have underscored the consumer risks involved, particularly when operators manage and hold client assets without adequate safeguards,” he stated.
“Our aim is to legitimize responsible businesses and exclude bad actors, providing businesses with clarity and consumers with confidence.”
Significant Penalties, but Exemptions for “Low Risk” Platforms
According to a Treasury Department press release, violations of the proposed law could result in penalties of up to 16.5 million Australian dollars (approximately $10.8 million USD), three times the illicit gain, or 10% of annual turnover – whichever amount is greater.
Platforms deemed “smaller and low-risk,” managing less than 5,000 Australian dollars (around $3,300 USD) per customer and facilitating less than 10 million Australian dollars (approximately $6.6 million USD) in transactions annually, will be exempt from these rules.
The Treasury clarified that this exemption aligns with the existing approach to financial products like non-cash payment systems. The legislation is not intended to impose new regulations on crypto issuers or those who create or use crypto for non-financial purposes.
Crypto Industry Expresses Support
Several major cryptocurrency exchanges operating in Australia have publicly supported the government’s proposed legislation, welcoming the move to integrate crypto businesses under the Australian Financial Services License framework.
Swyftx CEO Jason Titman stated to Cointelegraph that he supports the announcement and anticipated “a requirement for exchanges to hold a financial services license.”
“I don’t believe our industry should fear high standards,” he added. “It appears the government is taking a sensible and thoughtful approach, balancing consumer protection with innovation.”
OKX Australia CEO Kate Cooper told Cointelegraph that the “true test” of the draft laws will be their enforcement, ensuring that “compliant, licensed operators are not disadvantaged by unregulated players and that Australian consumers receive proper protection.”
Related: ASIC simplifies licensing requirements for stablecoin distributors in Australia
Crypto.com Australia General Manager Vakul Talwar described the draft legislation as “long overdue” and supported regulating crypto under existing financial services laws, stating that it “protects consumers without creating excessive bureaucracy.”
Talwar added that the proposed laws demonstrate “a clear understanding of the sector’s needs,” and that a prior proposal by ASIC requiring businesses to hold a market operating license “would have suppressed innovation and driven companies out of the Australian market.”
Kraken Australia Managing Director Jonathon Miller stated that the draft legislation provides “greater certainty for investors and institutions,” but emphasized that “it is essential that regulation avoids a rigid, one-size-fits-all approach that could hinder competition or put smaller innovators at a disadvantage.”
Mulino indicated that the government will now undertake a comprehensive consultation process regarding the draft rules. Feedback from this process will be used to refine the legislation into its final form.
The Treasury Department has opened the draft legislation for public comment until October 24th.
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