Australia is poised to significantly strengthen its regulatory framework for cryptocurrency service providers, signaling a major shift towards integrating the digital asset sector into established financial laws. This ambitious move is part of the government's broader digital asset roadmap, aiming to enhance consumer protection and foster certainty within the burgeoning crypto market.
Extending Financial Sector Oversight
The Australian government has unveiled draft legislation designed to extend its comprehensive financial sector regulations to cryptocurrency exchanges and related platforms. Currently, many crypto exchanges simply register with the Australian Transaction Reports and Analysis Centre (AUSTRAC), a process that has led to a large number of inactive entities. The proposed bill aims to change this by creating two new financial product categories—a "digital asset platform" and a "tokenized custody platform"—both of which would require an Australian Financial Services License (AFSL). This crucial change means that all providers facilitating digital asset trading and custody will be registered with the Australian Securities and Investments Commission (ASIC), bringing them under the same stringent oversight as traditional financial institutions. This move is explicitly designed to enhance consumer protection, legitimize reputable actors, and provide much-needed certainty in the market.
New Obligations and Enforcement
Beyond licensing, the legislation introduces specific rules tailored for key crypto activities, including wrapped tokens, public token infrastructure, and staking. Crypto platforms will also be subject to unique obligations for holding digital assets and settling transactions, addressing consumer risks highlighted by past failures in the sector. To ensure compliance, serious breaches of the new law will incur substantial penalties, potentially reaching AUD 16.5 million, triple the profit gained, or 10% of annual turnover, whichever is greater. However, recognizing the varying risk profiles, "lower-risk" platforms managing less than AUD 5,000 per client or facilitating under AUD 10 million annually will be exempt from these extensive requirements, aligning with approaches for other non-cash payment services. The legislation specifically avoids imposing new rules on crypto issuers or those using cryptocurrencies for non-financial purposes.
Industry Support and Future Steps
The Australian cryptocurrency industry has largely welcomed the proposed bill, viewing it as a necessary step towards legitimacy and clearer operational guidelines. Major exchanges have expressed support for the integration into the existing financial services licensing regime, praising the government's balanced approach to consumer protection and innovation. While acknowledging the importance of high standards, industry leaders also emphasized the need for careful implementation to avoid stifling competition or disproportionately impacting smaller innovators. The government has opened the draft legislation for extensive public consultation until October 24, inviting stakeholders to provide feedback to refine the regulations into their final form, aiming for a robust yet adaptable framework for Australia's digital asset future.
