The Australian government made a new advancement toward regulating cryptocurrency business in the country amid a surge in fraudulent activities and reported losses. The Australian treasurer Jim Chalmers proposed on Sunday, October 15, a set of regulations for the crypto sector.
Key takeaways
- Crypto exchanges and digital asset platforms are to adhere to existing financial services laws and obtain an Australian financial services license
- The objective of the proposal is to enhance oversight and standards to reduce the risk of digital asset platform collapses
- Law enforcement officers should be prepared to adapt their investigative techniques to align with the evolving regulatory framework.
According to Commonwealth Bank data, Australians spent $20 billion in cryptocurrencies in 2021. According to research by the US crypto exchange Gemini, over one-fifth (18%) of Australians purchased digital currencies in 2021. According to Gemini’s Global State of Crypto survey, 43% of Australians started investing in cryptocurrency for the first time in 2021. Unfortunately, however, much of these fortunes were lost when the market crashed throughout the following year.
This Australian initiative, considered one of the most extensive reforms for the industry thus far, has the primary objectives of enhancing consumer protection, encouraging innovation within the sector, and providing greater operational transparency, as outlined in a proposal paper released on a Sunday.
To align crypto platforms with existing Australian financial services regulations, similar to other industries, these platforms will also need to comply with specific obligations. These include establishing minimum standards for token storage, custody software protocols, and transactional integrity, as detailed in a fact sheet.
The proposals include cash reserve and liquidity bounds, which would apply whenever platforms own more than AU$1,500 (US$949) of an individual’s assets or more than AU$5 million in collective holdings.
Digital asset platforms will need to fulfill general licensing requirements, consistent with other license holders under Australian financial services laws. Additionally, there will be specific regulations for various digital asset activities such as trading, staking, tokenization, and fundraising, inspired by digital asset regulation frameworks in the EU, UK, Canada, and Singapore.
The proposed regulations primarily target service providers rather than the digital assets themselves and aim to remain technologically neutral. Stakeholders can provide feedback on the proposal until December 1, with draft legislation slated for further consultation next year. If the legislation is approved, a twelve-month transitional period will precede its implementation.
In addition, if approved, the authorities would require cryptocurrency exchanges and other businesses to collect customer information and report suspicious activity to law enforcement. This would make it easier for law enforcement to investigate cryptocurrency crimes and identify the perpetrators.
This initiative signals that the Australian government is aware of the underlying risks associated with unregulated cryptocurrency activities. This indicates that will have the resources and support they need to investigate cryptocurrency crimes as regulators continue to increase their scrutiny of cryptocurrency service providers.
Law enforcement officers should be prepared to adapt their investigative techniques to align with the evolving regulatory framework. This may include taking new training programs and investing in new investigative tools.
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Written By: Omar Marzouk
Writer, Content marketing at Blockchain Intelligence Group
