Australian Treasury Proposes Regulation for Crypto Exchanges, Not Tokens

The Australian government is making significant strides in its efforts to regulate the digital asset sector, focusing primarily on cryptocurrency exchanges. In a recently unveiled consultation paper titled “Regulating Digital Asset Platforms” on October 16, the Australian Treasury introduced a new regulatory framework. The primary objective is to address consumer protection concerns while fostering innovation within the digital asset sector.

Crucially, the proposed framework targets cryptocurrency exchanges and service providers, rather than individual cryptocurrencies or tokens. Unlike other countries, Australia plans to regulate crypto exchanges using existing financial services laws, avoiding the creation of new crypto-specific regulations.

Under the proposed rules, any crypto exchange holding assets exceeding $3.2 million or more than $946 per individual must obtain a license from the Australian Securities and Investment Commission (ASIC). This move has sparked varied responses from the local crypto exchanges.

Adam Percy, the general counsel of Swyftx, praised the proposal, describing it as “thoughtful.” He emphasized the importance of ensuring that cryptocurrency users have access to blockchain technology while being adequately protected and leaving room for innovation.

However, Jonathon Miller, the Director of Kraken Australia, expressed disappointment, criticizing the government for fitting crypto into existing financial services regulations. He noted that Australia lags behind global peers in implementing a comprehensive crypto framework but acknowledged the need for local regulations to provide certainty to platforms.

Liam Hennessy, a partner at international law firm Clyde & Co, pointed out that the Treasury’s suggestions in the consultation paper are not legally binding recommendations. While the Treasury is seeking feedback, Hennessy emphasized the pressing issues faced by the Australian crypto industry, including challenges related to banking arrangements for licensed digital asset exchanges.

One significant concern raised was the recent trend of de-banking, impacting both domestic and international licensed digital asset exchanges. Despite this, the Treasury’s focus remains on gathering feedback through the consultation paper, with a deadline for submissions set for December 1, 2023. The outcome of this regulatory initiative will likely shape the future landscape of the crypto industry in Australia.

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