The Australian government is pushing ahead with plans to regulate domestic crypto exchanges by requiring them to hold a financial services license.
Viewed as perhaps the most expansive reform for the industry to date, the move aims to bolster consumer protection, promote industry innovation and offer greater operational clarity, according to a proposal paper on Sunday.
In an attempt to bring crypto platforms under existing Australian financial services laws in line with other industries, such platforms will also be required to adhere to specific obligations.
Those include minimum standards for token holding, custody software protocols and transactional integrity, according to a fact sheet.
“Close to a quarter of Australian adults today own digital assets and adoption continues to grow,” Adam Percy, domestic crypto exchange Swyftx’s general counsel told Blockworks.
“The Government consultation is thoughtful and we agree 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,” Percy continued.
While digital asset platforms in Australia manage billions of dollars in assets and offer services like trading and staking, there is heightened scrutiny, not only in Australia but globally, due to past platform failures that resulted in substantial losses for consumers.
“Consumer harms associated with digital assets have centered around the vulnerabilities of intermediaries,” the government proposal states.
Sunday’s proposal follows previous efforts to streamline crypto regulation under a token-mapping exercise that sought to define digital assets. The new proposal also builds on the current administration’s push to bring the asset class under an appropriate regulatory framework.
“Collapses of crypto platforms, both locally and globally, have seen Australians lose their assets or be forced to wait their turn amongst long lines of creditors,” Stephen Jones, assistant treasurer and minister for financial services said.
“The proposed reforms seek to reduce the risk of these collapses happening by lifting the standard of the operation of platforms and increasing oversight.”
Digital asset platforms will have to meet general license obligations, consistent with other license holders under Australian financial service laws.
Moving forward
In addition to general obligations, unique regulations will apply to specific digital asset activities such as trading, staking, tokenization and fundraising, the proposal reads.
Those targeted measures are designed to minimize the exploitation of regulatory loopholes and are inspired by digital asset regulation frameworks in the EU, UK, Canada and Singapore, the government said.
Read more: Two crypto exchanges now have major payment license in Singapore
The proposed regulations focus on service providers rather than digital assets themselves. The framework, according to the government, is designed to be technologically neutral.
Feedback on the proposal is open until Dec. 1, with draft legislation planned for further consultation next year.
The implementation will follow a twelve-month transitional period should the legislation be signed into law.
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