Australia Drafts New Crypto Regulations, Targets Exchanges and Platforms

TLDR

• Australia introduces new licensing requirements for crypto exchanges.
• Draft crypto legislation targets key activities like staking and wrapped tokens.
• Smaller crypto platforms exempt from new rules based on size and risk.
• Heavy penalties for breaches of new crypto regulations in Australia.

Australia is working to tighten regulations for crypto service providers with new draft legislation aimed at extending finance sector laws to crypto exchanges. This move is part of the Albanese Government’s broader digital asset roadmap, which was outlined in March. Assistant Treasurer Daniel Mulino confirmed the draft legislation on Thursday during a crypto conference, calling it a cornerstone of the country’s strategy for digital assets.

New Financial Products and Licensing Requirements

The proposed legislation introduces two new financial products under the Corporations Act: the “digital asset platform” and the “tokenized custody platform.” Service providers dealing with these platforms will need to hold an Australian Financial Services License. Currently, only exchanges dealing with “financial products,” such as derivatives, must register with the Australian Securities and Investments Commission (ASIC).

Mulino explained that the law would help standardize how crypto exchanges are registered and regulated, with the aim of providing more clarity and security. This new framework would bring crypto exchanges under the jurisdiction of ASIC, ensuring that platforms adhere to key regulatory requirements.

Targeted Rules for Crypto Activities

The draft legislation also includes specific rules for critical crypto activities, including wrapped tokens, public token infrastructure, and staking. These rules are designed to accommodate the unique characteristics of digital assets, such as how they are held and transactions are settled.

Mulino emphasized that the legislation aims to protect consumers by addressing risks associated with digital asset businesses. In particular, he noted the dangers when crypto platforms pull and hold client assets without adequate safeguards. The goal is to separate responsible operators from those who pose risks to consumers and the broader financial system.

Penalties and Exemptions for Smaller Platforms

Breaches of the new regulations could result in heavy penalties. Fines could reach up to 16.5 million Australian dollars ($10.8 million) or three times the benefit obtained from the violation, whichever is greater. However, smaller platforms deemed “low-risk” will be exempt from these rules. These platforms, which hold less than 5,000 Australian dollars ($3,300) per customer and facilitate transactions of less than 10 million Australian dollars ($6.6 million) annually, will not be subject to the legislation.

The Treasury’s approach aligns with its treatment of other financial products, such as non-cash payment facilities, where smaller players face fewer burdens. The proposed legislation does not impose new rules on crypto issuers or entities using crypto for non-financial purposes.

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