The Albanese government will seek to leverage existing Australian financial services laws in its newly unveiled plan to regulate digital and crypto asset platforms in Australia.
In a proposal paper released on Monday, the government said its regulatory framework aims to address consumer harms in the crypto ecosystem while supporting innovation.
Under the proposal, digital asset platforms which hold more than $5 million in aggregate, or $1,500 for an individual, will need to obtain an Australian Financial Services Licence.
Digital asset platforms will need to meet all general licence obligations, including acting “efficiently, honestly, and fairly”, managing conflicts of interests, having a dispute resolution system, and meeting solvency and cash reserve requirements.
Specific additional obligations will also apply which take into account the nature of the platforms, including standard form platform contracts, minimum standards for holding tokens, standards for custody software, and standards when transacting tokens.
The government indicated that these obligations were inspired by frameworks used to regulate platforms in other jurisdictions such as the EU, UK, Canada, and Singapore.
In a joint statement on Monday, Treasurer Jim Chalmers and Financial Services Minister Stephen Jones said that regulating crypto and digital assets will help to protect consumers, support innovation, and provide industry certainty.
“The Albanese government is acting methodically to ensure that consumers are adequately protected and innovation can flourish,” they said.
“Our proposals have been designed to ensure they are consistent with other jurisdictions, adopt existing financial service laws as appropriate, and create new bespoke obligations in the areas of highest risk.”
Approximately one in four Australians own some form of crypto, according to Treasury, which reported that digital asset platforms hold billions of dollars of assets for Australians.
Notably, a number of platform collapses in Australia and overseas, including FTX earlier this year, have resulted in Australians losing their assets or being among a long list of creditors.
“The proposed reforms seek to reduce the risk of these collapses happening by lifting the standard of the operation of platforms and increasing oversight,” Dr Chalmers and Mr Jones said.
Consultation on the government’s proposed regulatory framework will close on 1 December, with further consultation on draft legislation expected next year.
Reacting to the proposal on Monday, BTC Markets chief executive officer Caroline Bowler said the crypto exchange was “pleased to have reached this key milestone”.
“A positive progression for the crypto industry; a great next step for the Australian economy. Digital assets are so clearly the future of financial services. It is imperative the country keeps pace with our international peers, with a robust regulatory framework,” she said.
Ms Bowler noted that BTC Markets has long agitated for “appropriate, proportional regulation” for the local crypto industry.
“BTC Markets has actively engaged with the regulatory process locally and contributes to international submissions. We look forward to continuing the consultation process with government on this key legislation,” she continued.
“We share the desire for widespread investor protections. Mirroring traditional financial products will give investors similar comforts when they trade crypto or other digital assets.”
Meanwhile, Jonathon Miller, managing director of Kraken Australia, suggested that the government is “shoehorning” crypto into existing financial services regulation.
“We’re behind our global peers when it comes to implementing a crypto framework, so I appreciate the need to have something in place locally to provide certainty to platforms like ours,” he said.
“Our concern is that this approach creates ample opportunities for the regulation to ignore the nuances of the technology (for example, unique services like NFTs). I’m hopeful that we can work collaboratively with the government to make sure we don’t snuff out the benefits of future innovations in crypto that might fall outside the conventional ‘financial services’ box.”
