The Australian government is pushing ahead with its efforts to oversee the crypto asset industry, specifically focusing on regulating crypto exchanges, a move that would possibly require the government to secure a license from the nation’s financial regulatory authority. The Australian Treasury unveiled a consultation paper, titled “Regulating crypto-asset platforms,” on Oct. 16, 2023, outlining a regulatory framework that aims to not only safeguard consumers but also foster innovation in the digital asset industry.
The main idea behind the new framework is to control crypto exchanges and service providers rather than the actual tokens or cryptocurrencies. Furthermore, rather than creating new regulations unique to cryptocurrencies, exchanges will be governed by already-existing financial services laws.
Under the new regulation, any exchange holding assets exceeding AUD$5 million or more than AUD$1,500 per client will be obligated to secure a license from the Australian financial regulator, ASIC.
The proposal has elicited conflicting responses from Australian crypto exchanges. Adam Percy, general counsel for Australian crypto exchange Swyftx, described the proposal as “thoughtful” and concurred that the main goal should be to guarantee that users of cryptocurrencies can use blockchain technology with the necessary protections and that there is space for innovation.
On the other hand, Kraken Australia’s director, Jonathon Miller, expressed his disappointment, characterizing the paper as an attempt to awkwardly fit crypto into the existing framework of financial services regulation. Miller further stated that Australia lags behind global peers in implementing a comprehensive crypto regulatory framework, thus creating a need for regulations to provide certainty for crypto platforms in Australia.
Miller also emphasized the need for government collaboration to ensure that innovations in crypto outside conventional financial services are not stifled.
Clyde & Co. law firm partner Liam Hennessy stated that the proposals outlined in the paper are not legally binding but rather mere suggestions that the government could decide whether or not to follow. He also observed that the paper may not sufficiently address more immediate challenges faced by the Australian crypto sector, such as the recent trend of debanking. Many licensed digital asset exchanges, both domestic and international, are grappling with the difficulty of finding suitable banking arrangements.
The treasury stated that the purpose of the consultation paper is to obtain input on the various questions and regulatory proposals within it. Stakeholders have been encouraged to submit their feedback by the end of November.
The regulatory developments for the crypto space in jurisdictions such as Australia may act as springboards for countries where companies such as Canaan Inc. (NASDAQ: CAN) operate to pick lessons and design their own regulations for the industry.
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