The Australian federal government is moving forward with its plans to regulate the digital asset sector at the exchange level. In a newly-released consultation paper titled “Regulating digital asset platforms,” the Australian Treasury outlined its intention to require cryptocurrency exchanges to hold a financial services license issued by the local financial regulator. The objective of this regulatory framework is to address consumer harms while still fostering innovation in the digital asset sector.
Rather than regulating individual cryptocurrencies or tokens, the proposed framework focuses on regulating cryptocurrency exchanges and service providers. The aim is to apply pre-existing financial services laws to these entities, instead of creating new crypto-specific regulations. However, some industry players, such as Jonathon Miller, the Director of Kraken Australia, have expressed disappointment, noting that this approach neglects the unique characteristics of the technology.
Miller emphasized the importance of having a crypto framework in place to provide certainty for platforms like Kraken Australia. However, he expressed concerns that the proposed regulatory framework could potentially stifle future innovations in crypto that may fall outside the conventional bounds of financial services. Nonetheless, Miller remains hopeful that collaborative efforts with the government can prevent such negative outcomes.
Liam Hennessey, a partner at international law firm Clyde & Co, pointed out that the Treasury is still grappling with the various types of tokens and service providers in the crypto industry. He emphasized that the suggestions put forth in the consultation paper are not legally binding recommendations but rather subject to further discussion and lobbying.
However, Hennessey also noted that the consultation paper does not adequately address some of the pressing issues facing the crypto industry in Australia, such as the challenges related to banking arrangements. Many licensed digital asset exchanges, both domestic and international, have been struggling to find suitable banking partners in Australia.
It is important to note that the proposals outlined in the consultation paper are still in the suggestion stage and are not yet binding. Further information and updates on this developing story are expected in the future.
Overall, the Australian government’s move to regulate the digital asset sector at the exchange level aims to strike a balance between consumer protection and fostering innovation. However, industry stakeholders have raised concerns about the potential limitations this regulatory framework may impose on future crypto innovations. The consultation process will provide an opportunity for further discussions and lobbying to shape the final regulatory framework.