Australia is set to significantly bolster its oversight of the cryptocurrency sector with a new draft law that will require all digital asset platforms and crypto exchanges to obtain an Australian Financial Services Licence. This move aims to enhance consumer protection, combat financial crime, and provide greater certainty for businesses and investors in the rapidly evolving digital asset landscape.
Key Takeaways
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All crypto exchanges and digital asset platforms will need an Australian Financial Services Licence.
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New categories of "digital asset platform" and "tokenized custody platform" will be created under the Corporations Act.
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Stricter rules will apply to activities like wrapped tokens, public token infrastructure, and staking.
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Penalties for breaches can reach up to AUD 16.5 million.
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Smaller, low-risk platforms with less than AUD 5,000 per customer and under AUD 10 million in annual turnover will be exempt.
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The draft legislation is open for public consultation until October 24.
Stricter Oversight for Crypto Businesses
Assistant Treasurer Daniel Mulino announced the draft legislation, describing it as the "cornerstone" of the government's digital asset roadmap. The proposed law extends existing financial sector regulations to crypto businesses, requiring them to hold an Australian Financial Services Licence (AFSL). This means all exchanges will need to register with the Australian Securities and Investments Commission (ASIC), a significant shift from the current system where only exchanges dealing in traditional financial products require such registration.
Currently, crypto exchanges primarily need to register with the Australian Transaction Reports and Analysis Centre (AUSTRAC). The new framework introduces two new financial product categories: "digital asset platform" and "tokenized custody platform." Service providers in these categories will be subject to a suite of obligations tailored to the unique characteristics of digital assets, including standards for holding crypto and settling transactions. Mulino emphasized that the move is intended to "legitimize the good actors and shut out the bad," providing businesses with certainty and consumers with confidence.
Penalties and Exemptions
Breaches of the new law could result in substantial penalties, including fines of up to AUD 16.5 million, three times the obtained benefit, or 10% of annual turnover, whichever is greater. However, the legislation includes exemptions for smaller, low-risk platforms. These are defined as platforms holding less than AUD 5,000 per customer and facilitating less than AUD 10 million in annual turnover. This exemption is consistent with the approach taken for other financial products like non-cash payment facilities.
Industry Response
Major cryptocurrency exchanges operating in Australia have largely welcomed the draft law. Industry leaders expressed support for bringing crypto businesses under the AFSL regime, viewing it as a positive step towards balancing consumer protection and innovation. They highlighted the need for clear regulations that prevent unregulated players from undercutting licensed operators and ensure robust consumer safeguards. Some also stressed the importance of a flexible regulatory approach that does not stifle competition or disadvantage smaller innovators.
Broader Regulatory Push
This initiative is part of a broader effort by Australian authorities to enhance Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) rules within the crypto industry. AUSTRAC has also proposed updated AML/CTF rules, focusing on increased customer due diligence, stricter reporting obligations, and tighter rules for businesses, particularly in high-risk sectors like cryptocurrency. The government is also exploring measures to address "debanking," where crypto-related businesses face difficulties accessing traditional banking services, and plans to introduce an enhanced regulatory sandbox for fintech startups.
Key Takeaways
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Australia Drafts Law to License All Crypto Exchanges, Cointelegraph.
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Australia Drafts Law to Tighten Oversight of Digital Asset Platforms, Decrypt.
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Australia proposes stricter crypto rules to curb financial crime, Cointelegraph.
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Australia Proposes New Crypto Framework And Pledges Action On Debanking, Bitget.
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