Crypto Exchanges Face New Regulatory Requirement In Australia

The Australian government has recently declared its plan to regulate the digital asset sector by requiring crypto exchanges to obtain a financial services license from the local regulator. The move aims to protect consumers and encourage innovation within the crypto industry. However, there are concerns voiced by some exchanges on the move.

New Consultation Paper Released

The Australian Treasury published a consultation paper titled “Regulating digital asset platforms” on October 16. The paper outlines the proposed regulatory framework for crypto exchanges and service providers, aiming to address consumer harms and systemic risks associated with the digital asset sector while supporting its growth and development.

The paper proposes regulating crypto exchanges by applying the existing financial services regime rather than formulating separate rules for cryptocurrencies. In this framework, crypto exchanges would be required to seek a financial services license from the Australian Securities and Investment Commission (ASIC) and adhere to the same obligations as other financial service providers.

The paper clarifies that regulations would primarily target crypto exchanges and service providers rather than individual cryptocurrencies or tokens. It recognizes the existence of diverse crypto assets, including payment tokens, utility tokens, security tokens, and stablecoins.

The paper acknowledges that some of these assets may not currently fall under the definition of financial products as per the Corporations Act. To address this concern, the paper suggests conducting a token mapping exercise by the end of 2023. This exercise would classify different types of crypto assets and determine whether they should be regulated as financial products.

Mixed Reactions From Crypto Exchanges

The consultation paper on crypto exchanges operating in Australia has garnered a mix of reactions. Some view the proposal as a positive stride toward providing clarity and certainty within the crypto sector, while others criticize it as a regressive and restrictive approach that may stifle innovation and competition.

Jonathon Miller, the director of Kraken Australia, expressed disappointment with the proposal. He described it as “shoehorning” crypto into existing financial services regulation. According to him, Australia lags behind other countries in implementing a comprehensive crypto framework. Miller hopes to collaborate with the government to ensure that future innovations in crypto are not overlooked by regulatory measures.

“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,” said Miller.

Furthermore, Australian crypto exchange Swyftx’s general counsel, Adam Percy, expressed his support for the proposal, considering it to be thoughtful. He emphasized the importance of ensuring that cryptocurrency users can access blockchain technology while being protected and allowing room for innovation.

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Kashif Saleem

Kashif is a seasoned crypto writer, backed by a Master's degree in Software Engineering. He has been head-over-heels for cryptocurrencies since 2019, diving deep into the Cryptoverse and has authored more than 1k articles on cryptocurrency and blockchain. Follow him on X & LinkedIn or reach him at [email protected].

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