The Australian Treasury has, in a recent consultation paper, obligates crypto exchanges to obtain financial services licensing from the local regulator. The Monday, October 16 publication stipulates that crypto exchanges comply with the financial services license granted by the local regulator.
The consultation paper portrays the Australian federal government’s devotion to enforcing regulations targeting oversight of the digital asset sector activities. In particular, the federal government seeks to regulate the digital asset sector at the exchange level. The government is set to obligate the cryptocurrency exchanges to obtain a license to offer financial services from the local financial regulator.
Australia to Regulate Crypto at the Exchange Level
The Australian Treasury on Monday, October 16, released a consultation paper titled ‘Regulating Digital Asset Platforms.’ The publication captures the new regulatory framework the Treasury seeks to leverage to resolve consumer harms witnessed in the digital asset sector. Also, the framework outlines a guided approach towards nurturing innovations within the cryptocurrency sector.
Notably, the Australian Treasury’s paper emphasizes a core focus to regulate the cryptocurrency exchanges and providers of crypto-related services rather than the individual tokens. The consultation paper outlines the Australian Treasury’s resolve to regulate the digital asset exchanges guided by the pre-existing laws on financial services rather than craft crypto-specific rules.
The consultation paper clarifies that the proposed rules obligate the crypto exchanges holding over A$5 million, translating to $3.2 million, to seek licensing granted by the Australian Securities and Investment Commission (ASIC). Also, it subjects the individuals holding over $946 to comply with similar requirements.
Treasury Proposals Criticized as Shoehorning Crypto to Financial Services Regulation
Crypto attorney Aaron Lane lauded the move as logical and aligned with the proposals by the industry. The lawyer admitted the absence of tax clarity on crypto-related activities. Nonetheless, he confessed that the approach portrayed a leap towards crypto regulation at the exchange level.
The proposed regulatory framework has experienced a mixed reception from the digital asset exchanges operating within the country.
Adam Percy from crypto exchange Swyftx termed the proposal as thoughtful. The general counsel lauded the consultation paper as primarily oriented towards ensuring digital asset users access and leverage blockchain technology. The counsel admits that the proposal delivers the appropriate protections to nurture innovation.
Jonathan Miller from Kraken Australia denounced the developments, alleging that the consultation paper shoehorned the digital assets into the conventional financial services regulation. The Kraken director regretted Australia’s unfortunate situation that the Treasury delayed to match the unique requirements of the cryptocurrency industry. Miller added that Australia lagged behind its global peers in crypto framework implementation matters. The Kraken executive appreciated the need for an Australian framework to instill certainty in the digital asset system.
Miller expressed optimism about the digital asset stakeholders working collaboratively with the Australian government. Doing so would avoid snuffing the benefits attributed to the subsequent crypto-related innovations that fall beyond the conventional financial services scope.
Consultation Paper Harbour Suggestions Lacking Legal Obligations
Liam Hennessy from Clyde & Co. international law firm called the consultation paper evidence of the Treasury’s grappling with various tokens and crypto-related service providers. The counsel indicated that the new proposals outlined in the consultation paper constitute suggestions and not legally binding recommendations.
Hennessy reiterated that the Treasury proposal amounted to suggestions. The law firm’s partner submitted that the government policies and actions are not bound to comply with the recommendations. The law firm’s partner admitted that the proposals would prompt lobbying once the consultation paper is availed.
Hennessy decried that the consultation paper unveiled by the Australian Treasury failed to resolve the pressing issues confronting the country’s crypto industry.
The international law firm partner cited the failure to address the recent debanking. Hennessy lamented that most licensed crypto exchanges, whether local or international, are struggling to secure adequate banking arrangements in the country.
Meanwhile, the Treasury noted that the consultation paper sought feedback by December 1 on the multiple questions and regulations suggested.