Draft legislation to create new crypto products has been released by Australia, placing crypto companies under the same rules as financial services businesses.
Stricter regulations around crypto service providers are being aimed for by Australia, with draft legislation that would extend finance sector laws to crypto exchanges.
A crypto conference was told by Assistant Treasurer Daniel Mulino on Thursday that the legislation is “the cornerstone of our digital asset roadmap,” which the Albanese Government released in March.
“This is a preliminary version of the legislation, and stakeholder feedback is being sought on its effectiveness and clarity before proceeding further,” he said.
Currently, crypto exchanges that solely facilitate trading assets like Bitcoin are only required to register with the Australian Transaction Reports and Analysis Centre (AUSTRAC), which has reported 400 crypto exchanges on its books, many of which are inactive.
Draft Law Proposes Creation of Two New Financial Products
Two new financial products, a “digital asset platform” and a “tokenized custody platform,” would be established under the Corporations Act by the draft legislation, Mulino said.
An Australian Financial Services License will be required to be held by digital asset platform and tokenized custody platform service providers, he said.
All exchanges would be registered with the Australian Securities and Investments Commission by the license. Currently, only exchanges that sell “financial products,” such as derivatives, must register with the corporate regulator.
Targeted rules for key activities such as wrapped tokens, public token infrastructure, and staking have been included in the legislation, Mulino added.
A suite of obligations intended for the unique characteristics of digital assets will also be applied to crypto platforms, Mulino stated, including standards for holding crypto and settling transactions.
He added that consumer risks have been highlighted by the failures of digital asset businesses, particularly where operators pull and hold client assets without consistent safeguards.
This is about legitimizing good actors and shutting out the bad. Certainty is provided to businesses, and confidence to consumers.
Heavy Fines Ahead, While Low-Risk Platforms Stay Exempt
Penalties of up to 16.5 million Australian dollars ($10.8 million), three times the benefit obtained, or 10% of annual turnover—whichever is greater—will be applied for breaches of the law, according to a Treasury press release.
Platforms categorized as “smaller, low-risk,” which hold less than 5,000 Australian dollars ($3,300) per customer and facilitate less than 10 million Australian dollars ($6.6 million) a year, will be excluded from the new rules.
The Treasury stated that the exemption is consistent with the approach to financial products such as non-cash payment facilities, adding that new rules are not being imposed on crypto issuers or those that create or use crypto for non-financial purposes.
Crypto industry backs draft law
Major crypto exchanges operating in Australia have backed the government’s draft law, with its decision to bring crypto businesses under the Australian Financial Services License regime being lauded by them.
The announcement was welcomed by Swyftx CEO Jason Titman, who told he was expecting a requirement for exchanges to hold a financial services license.
“High standards should not be feared by our industry,” he added. “It looks like the government is balancing consumer protections and innovation in a sensible and thoughtful way.”
The “real measure” of the draft laws will be their enforcement, OKX Australia CEO Kate Cooper told , to ensure that responsible, licensed operators are not undercut by unregulated players and Australian consumers are protected.
The decision to regulate crypto under financial services laws was backed by Crypto.com Australia general manager Vakul Talwar, who said the draft legislation was “long overdue” and that it “protects consumers without imposing excessive red tape.”
Talwar added that the draft laws show “a clear understanding of the sector’s needs,” and that innovation would have been stifled and firms driven offshore and away from the Australian market by a proposal by ASIC for businesses to hold a market operating license.
Greater certainty is given to investors and institutions by the draft legislation, Kraken Australia managing director Jonathon Miller said. He added it was “vital that regulation avoids a one-size-fits-all approach that could stifle competition or disadvantage smaller innovators.”
Mulino said the government would now conduct a wide consultation on the draft rules, which will be utilized to develop them into their final version.
Feedback on the draft legislation is being sought by the Treasury until Oct. 24.
