Crypto exchanges to fall under TradFi licensing — Australian Treasury proposal

The Australian federal government may soon require cryptocurrency exchanges to hold a financial services license issued by the local financial regulator, the Australian Securities and Investments Commission (ASIC).

In the recently presented consultation on “Regulation of digital asset platforms” paperPosted on October 16, the Australian Treasury said the new regulatory framework aims to address consumer harm while supporting innovation in the digital asset sector.

The core theme of the new regulatory framework is that it aims to regulate cryptocurrency exchanges and service providers rather than individual cryptocurrencies or tokens. Additionally, the consultation document explained that it will regulate cryptocurrency exchanges under pre-existing financial services laws, rather than drafting new rules specific to cryptocurrencies.

Jonathon Miller, director of Kraken Australia, expressed disappointment at the latest developments and said the consultation paper was essentially “shoehorning” cryptocurrencies into existing financial services regulation.

“We are behind our global peers when it comes to implementing a crypto framework, so I appreciate the need to have something implemented locally to provide certainty to platforms like ours,” Miller said. "Our concern is that this approach creates ample opportunities for regulation to ignore the nuances of the technology."

"I am hopeful that we can work collaboratively with the Government to ensure that we do not eliminate the benefits of future innovations in crypto that could fall outside the mainstream 'financial services' box.

Liam Hennessey, partner at international law firm Clyde & Co, said that while it is clear that the Treasury is still "dealing" with all the different types of tokens and service providers, it is crucial to remember that all the new proposals set out in the consultation document These remain only suggestions and are not legally binding recommendations.

"Whatever the Treasury suggests, it is just that: just a suggestion. The Government is not obliged to follow its recommendations, and there will be lobbying once the consultation document comes out."

Hennessy said the consultation document arguably does not address the most pressing issues facing the crypto industry in Australia, such as issues such as the recent spate of debanking.

“Many licensed digital asset exchanges, both domestic and international, are struggling to find suitable banking arrangements,” Hennessy said.

This is a developing story and more information will be added as it becomes available.