Australian Treasury urges crypto exchange regulation, not tokens

By: Henry Felix

Australian Treasury urges crypto exchange regulation, not tokens

October 16, 2023 8:12 AM

According to a new consultation paper from the Australian Treasury, cryptocurrency exchanges will need to apply for a financial services license from the country's financial authority.


The Australian federal government is pressing ahead with measures to regulate the digital asset industry at the exchange level, and cryptocurrency exchanges may soon be required to obtain a financial services license from the local financial authority.


The Australian Treasury stated its intention to address consumer problems while also fostering innovation in the digital asset sector in their recently issued "Regulating digital asset platforms" consultation paper on October 16th.

 

 

Proposed rules for platforms dealing in digital assets. Finance Department 
of the Australian Government


The new framework's basic idea is that cryptocurrency exchanges and service providers, rather than individual cryptocurrencies or tokens, should be subject to regulation. The consultation paper also stated that the government has no plans to create new crypto-specific legislation but will regulate cryptocurrency exchanges under existing financial services laws.


Any cryptocurrency exchange with a total balance of more than $3.2 million, or $946 per individual, will need to seek a license from the Australian Securities and Investments Commission (ASIC) under the new laws. 

 

Attorney Aaron Lane, who specializes in crypto law, noted that the sector 
has long advocated for this method. Source: Twitter


The Australian cryptocurrency exchange community has responded to the plan with a range of opinions.


General counsel for the Australian cryptocurrency exchange Swyftx, Adam Percy, found the plan "thoughtful" and stated that "the main goal should be on making sure cryptocurrency users have access to blockchain technology with suitable protections and that there's room for innovation."


However, Kraken Australia's Director Jonathon Miller has voiced his displeasure with the current developments, claiming that the consultation document is "shoehorning" crypto into existing financial services regulation. 


"Australia is now in an unfortunate circumstance where our regulation has taken quite a while, which means we're taking the route of shoehorning crypto into preexisting financial services regulation," said Miller. "We’re trailing most of our global peers when it pertains to establishing a crypto structure, so I recognize the importance of making sure we have everything in place locally to provide confidence to platforms like ours."


"To avoid stifling the potential of future crypto innovations that don't fit neatly into the traditional 'financial services' box, I'm optimistic that we can work together with the government to protect the industry's integrity."


Although it is evident that the Treasury is still "grappling" with the various token and service providers, as pointed out by Liam Hennessy, partner at international law firm Clyde & Co, all new proposals set out in the consultation paper are still only suggestions and not legally binding recommendations. 


"Anything the Treasury recommends is merely that, a recommendation. Once the consultation paper is released, there will be lobbying, and the government is under no obligation to implement its suggestions."


According to Hennessy, the consultation document potentially ignores the most important problems affecting the Australian cryptocurrency business, such as the recent wave of de-banking. 


"Several licensed digital-asset exchanges, domestically as well as globally, are having difficulty finding suitable banking arrangements," Hennessy said in a statement. 


The Treasury specifically said that the consultation paper is intended to "seek feedback" on the numerous questions and rules proposed within it and that responses should be received no later than December 1, 2023.