Australian Treasury Suggests Regulatory Oversight for Crypto Exchanges, Excludes Tokens

16 Oct 2023

Mitchell Nixon

author_avatar

The Australian Treasury’s recently issued consultation document stipulates that cryptocurrency exchanges must seek a financial services licence from the local financial regulatory authority.

The Australian federal government is making significant progress in its efforts to oversee the digital asset industry, particularly at the exchange level. They may soon mandate that cryptocurrency exchanges obtain a financial services licence from the local financial regulatory body.

Outlined in the recently unveiled “Regulating Digital Asset Platforms” consultation paper, released on October 16 by the Australian Treasury, the proposed regulatory framework seeks to tackle issues that affect consumers while also fostering innovation within the digital asset sector.

You can view the entire regulatory framework here. 

The fundamental focus of the fresh regulatory framework is centred on the regulation of cryptocurrency exchanges and service providers, rather than individual cryptocurrencies or tokens. Moreover, the consultation document clarifies that it will subject crypto exchanges to existing financial services regulations, without the creation of new, crypto-specific rules.

Per CoinTelegraph, the proposal has elicited a varied response from cryptocurrency exchanges in Australia.

Adam Percy, the general counsel of Swyftx, described the proposal 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.”

On the other hand, Jonathon Miller, Director of Kraken Australia, expressed his disappointment with the recent developments, characterising the consultation paper as essentially an attempt to fit crypto into the existing framework of financial services regulation.

“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.”

Liam Hennessey, a partner at the global law firm Clyde & Co, noted that while it’s evident that the Treasury is still wrestling with the various token types and service providers, it’s essential to bear in mind that all the new ideas presented in the consultation paper are merely proposals and do not constitute legally binding recommendations.

“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.”

Hennessy pointed out that the consultation paper may not effectively tackle the more immediate concerns within the Australian crypto industry, such as the recent wave of de-banking issues.

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

It’s worth noting that the Treasury emphasised that the primary purpose of the consultation paper is to “seek feedback” on the numerous inquiries and regulations it contains and encouraged the submission of feedback by December 1, 2023.

...