Key Insights
- Australia plans to introduce comprehensive crypto regulation by 2024.
- Once enacted, crypto exchanges will have a year to transition to the new regulatory framework.
- The proposed regulations aim to enhance consumer protection and could impact NFT marketplaces.
Australia is on the verge of a significant move in the world of cryptocurrency regulation, with plans to introduce comprehensive legislation covering licensing and custody rules for crypto asset providers. According to the announcement by the Australian Treasury, this draft legislation is expected to be unveiled by 2024.
Australian Crypto exchanges will have a 12-month transition period
Once this legislation is officially enacted, crypto exchanges in Australia will have a 12-month window to transition to the new regulatory framework. This transition period suggests that it might take until 2025 for an Australian digital asset platform to secure the required license under these new regulations.
This development marks a significant stride for the Australian government in establishing a structured framework for crypto regulation. The proposal for this legislation was initially announced in February 2023 and was eagerly anticipated by mid-2023. However, a slight delay was encountered, pushing the release to October.
Notably, this new proposal is distinct from an earlier consultation paper on token mapping. Token mapping is the process of aligning the activities and functions of crypto products with existing regulatory frameworks.
The release of this proposal aligns with Australia’s efforts to foster transparency and regulation in the crypto space. It comes at a time when Australia’s Assistant Treasurer and Minister for Financial Services, Stephen Jones, delivered a speech at The Australian Financial Review Crypto Summit. It was during this summit that the details of the proposal’s content were first disclosed.
Proposal could require licenses for NFT marketplaces and crypto exchanges
Commenting on this development, Michael Bacina, a digital asset lawyer at Piper Alderman and the Chair of Blockchain Australia, expressed, “Australia has been waiting for certainty over digital asset regulation so it can seek to catch up with the rest of the world.” He noted that the approach taken in the proposal is centered on consumer protection and is expected to encompass various business models that are currently unregulated, including NFT marketplaces that hold customer assets, which may require licensing.
The proposal suggests that all crypto exchanges holding more than AUD 1,500 ($946) from any one client or exceeding AUD 5 million ($3.15 million) in total assets will need to obtain an Australian Financial Services license. This license will be granted by the Australian Securities and Investments Commission. The proposal paper raises questions related to 32 themes and invites written submissions until December 1, 2023.
Local crypto exchange Swyftx has expressed support for the government’s consultation process, highlighting the need for a level playing field for both national and overseas crypto platforms. Adam Percy, the General Counsel of Swyftx, emphasized that the consultation process demonstrates thoughtfulness, with provisions for appropriate protections and room for innovation.
In addition to the legislative proposal, the Australian Treasury and the Reserve Bank of Australia are expected to collaborate on a joint report in mid-2024. This report will offer an overview of research on central bank digital currency (CBDC) in Australia and outline a roadmap for future work. The decision to delay any decision on a CBDC in Australia for several years was made earlier this year due to unresolved issues that emerged at the conclusion of the pilot project.