The Australian federal government has taken steps toward regulating the digital asset industry with a focus on cryptocurrency exchanges. They may soon require cryptocurrency exchanges to obtain financial services licenses from local regulators, according to the "Regulating Digital Asset Platforms" consultation document released by the Australian Treasury on October 16. The main objectives of the proposed regulatory framework are to address consumer protection while fostering innovation within the digital asset sector. The emphasis of this framework is on regulating exchanges and service providers rather than individual cryptocurrencies or tokens, and it seeks to do so by applying existing financial services laws rather than introducing new cryptocurrency-specific rules.
Under these proposed regulations, cryptocurrency exchanges with holdings exceeding US$3.2 million (AU$5 million) or US$946 (AU$1,500) per person would be required to obtain a license from the Australian Securities and Investments Commission (ASIC). The response to this proposal has been mixed among Australian cryptocurrency exchanges. Swyftx's General Counsel, Adam Percy, regarded the proposal as well-considered, emphasizing the need for cryptocurrency users to have access to blockchain technology with appropriate safeguards in place. In contrast, Jonathon Miller, the director of Kraken Australia, expressed disappointment with the consultation paper, characterizing it as an attempt to fit cryptocurrencies into existing financial services regulations. He underscored the need for measures that provide certainty for cryptocurrency platforms and innovations outside the traditional scope of financial services.
Liam Hennessy, a partner at the international law firm Clyde & Co, pointed out that while the Treasury's consultation paper is significant, it remains advisory and not legally binding. The government is not obligated to follow the recommendations outlined in the paper, and there will likely be lobbying efforts once the consultation period concludes. Hennessy also highlighted that the paper may not address the more immediate challenges facing the Australian cryptocurrency industry, such as the recent divestitures by banks. Many licensed domestic and international digital asset exchanges are struggling to secure appropriate banking arrangements.
The Treasury aims to gather feedback on the various issues and regulations outlined in the consultation paper and has set a deadline of December 1, 2023, for submissions.
