Australia has released their latest step in regulating cryptocurrencies within its borders.
The Australian treasury has released its regulatory suggestions in a consultation document aptly called “Regulating digital asset platforms”. As the name of the document suggests, the regulatory approach taken by the Australian treasury focuses on the regulation of crypto exchanges. This is to regulate the service providers rather than individual cryptocurrencies or tokens. The document does not showcase any innovative regulatory proposals but simply reuses and repackages similar regulations for traditional finance service providers.
A key takeaway from the document is that the Australian treasury is considering making it mandatory for crypto exchanges to obtain a financial services licence from the regulator. The proposed conditions for when an operating licence is required will apply when crypto exchanges hold more than $3.2 Million (AUD 5 Million) or more than $946 (AUD 1500) per individual. The time to apply for a financial services licence in crypto assets is expected to be well over a year, with applicants expecting to receive licences from 2024 to 2025. This may prove to be a considerable choke in cryptocurrency adoption in Australia.
“The approach is consumer-protection centric, with a broad net set to capture many business models not currently regulated. NFT marketplaces holding customer assets could also require licensing”, claims digital asset lawyer for Piper Alderman, Michael Bacina. Bacina’s comment highlights that the proposed regulation focuses on consumer protection but does little to provide legal clarity on specific types of digital assets. Similar criticism is drawn from the crypto insiders in Australia.
“This approach creates ample opportunity for the regulation to ignore the nuances of the technology”, said Johnathan Miller, Managing director of Kraken Australia. “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”. “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”.
Australia is lagging in regulation globally with the EU producing a dense and wide-reaching proposal in the form of its “Markets in Crypto Assets Report” (MiCA), and regional players for Australia such as Hong Kong and Singapore have proven to on the bleeding edge of dynamic industry by being agile in regulation proposal, testing, and adoption.
It should be noted that the entire point of the consultation is to “seek feedback” on the many questions and regulations proposed within it and advise that any feedback may be submitted by Dec 1, 2023.
The final iteration in 2024 will give a more definitive idea of whether the regulation on the exchange and service providers will prove to be an effective approach instead of concurrently regulating tokens.