Australia’s Progressive Shift Towards Regulating Cryptocurrency Platforms
Australia is taking significant strides to integrate cryptocurrency platforms into the mainstream financial framework. On Thursday, a proposal was unveiled that suggests imposing hefty penalties of up to A$16.5 million or 10% of a company’s annual revenue for severe non-compliance.
Understanding the Proposed Crypto Regulations
The proposed guidelines, as outlined in the Treasury’s exposure draft, mandate that cryptocurrency exchanges and custodians obtain an Australian Financial Services License. These entities will also be required to adhere to specific conduct standards designed to safeguard customers and their investments.
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Key Elements of the Crypto Regulatory Framework
The draft introduces two new categories of financial products: “digital asset platforms” and “tokenized custody platforms.” These will be incorporated into the Corporations Act, thereby placing them under the purview of the Australian Securities and Investments Commission (ASIC). Platforms managing client cryptocurrencies or facilitating trades must register, adhere to custody regulations, and enhance disclosure practices for retail consumers.
Assistant Treasurer Daniel Mulino emphasized these reforms during a regulatory conference, highlighting their role in eliminating fraudulent activities while supporting legitimate enterprises. The draft outlines precise responsibilities regarding asset management, settlement processes, risk management, and the necessary disclosures before offering services to the public. Enterprises with existing similar operations will encounter regulations akin to those governing banks and other financial institutions today.
Penalties and Compliance Thresholds
Insights from various briefings reveal that penalties for breaches will be determined by the greater of A$16.5 million, three times the gains from the breach, or 10% of annual turnover. This approach aims to deter intentional or large-scale violations rather than merely penalizing minor errors. A low-value exemption is also proposed, enabling small operators to bypass full licensing requirements if they hold less than A$5,000 per customer and process transactions under A$10 million annually.
The definition of “turnover” remains unspecified in the draft, leaving uncertainty as to whether it will encompass global revenue, Australia-specific revenue, or another metric. This ambiguity will significantly impact the severity of penalties for international exchanges. Additionally, the draft addresses specific activities like staking, wrapped tokens, and public token infrastructure. The government intends for the framework to remain adaptable, allowing regulators to modify controls based on evolving risks.
Industry Feedback and Future Directions
The proposed regulations have elicited cautious reactions from industry stakeholders, crypto associations, and global exchanges. While some view the clarity in regulations as a catalyst for growth by eliminating uncertainty, others caution that compliance costs could burden medium-sized enterprises.
The consultation period for the draft extends until 24 October 2025. Following this phase, the government will review feedback and refine the legislation before presenting the final version to Parliament.
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