Australia aims to tighten regulations on crypto service providers with legislation extending financial sector laws to crypto exchanges.
Deputy Associate Daniel Murino told a local time crypto meeting on Thursday that the law is a “ground of the digital asset roadmap” released in March.
“This is a preliminary version of the law and we want stakeholder feedback on its effectiveness and clarity before we go further,” he said.
Currently, crypto exchanges that simply promote trading assets such as Bitcoin (BTC) require registration with the Australian Transaction Reporting and Analysis Centre (Austrac).
Draft laws to manufacture two new financial products
Murino said the bill would create two new financial products: a “digital asset platform” and a “tokenized custody platform.”
“This means that digital asset platforms and tokenized custody platform service providers need to retain Australian financial services licenses,” he said.
The license registers all exchanges with the Australian Securities and Investment Commission. Currently, only exchanges that sell “financial products” such as derivatives must be registered with the corporate regulator.
Murino added that the law has “target rules for key activities” such as wrapped tokens, public token infrastructure and staking.
The cryptographic platform also carries out “a set of obligations designed to meet the unique characteristics of digital assets,” including standards for encryption and payment transactions.
“Digital asset companies’ failures highlight consumer risks, especially when operators are pulling and holding client assets without consistent protection,” he added.
“This is to legalize good actors and keep out the bad things. It’s to give businesses certainty and consumer trust.”
It’s a heavy penalty, but “low risk” platforms are exempt
A violation of the law is set to impose a penalty of up to $16.5 million ($10.8 million), three times the profits earned, or 10% (either) of annual revenue, according to a press release from the Treasury.
The platform, called “smaller, lower risk,” is less than Australian dollars ($3,300) per customer, which makes it easier to under $10 million ($6.6 million) per year, but is exempt from the rules.
The Treasury said the exemption is consistent with an approach to financial products such as non-cash payment facilities. The law adds that it does not require new rules to be imposed on crypto issuers or those who create or use cryptography for non-financial purposes.
The crypto industry supports the draft law
The major crypto exchange operating in Australia supports the government’s draft and praises the decision to introduce crypto businesses under the Australian Financial Services Licensing (AFSL) system.
Jason Titman, CEO of Swyftx, welcomed the announcement to the Cointelegraph, saying that he “hopefully expects the exchange to have a requirement to hold a financial services license.”
“I don’t think our industry should be afraid of high standards,” he added. “The government appears to balance consumer protection and innovation in a wise and thoughtful way.”
OKX Australia CEO Kate Cooper told Cointelegraph that the “actual action” of the bill is enforcement, saying, “Responsible, licensed operators are not covered by unregulated players and Australian consumers are protected.”
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Vakul Talwar, general manager of Crypto.com Australia, said the bill was “long postponed” and supported the decision to regulate Crypto under the Financial Services Act, in order to “protect consumers without imposing excessive deficits.”
Talwar added that the draft bill, which demonstrates “a clear understanding of the needs of the sector,” ASIC’s proposal to retain market operating licenses “silenced innovation and suppressed companies that were away from the offshore and Australian markets.”
Jonathon Miller, managing director of Kraken Australia, said the draft “gives more certainty for investors and institutions,” but added that “regulations are essential to avoid a one-size approach that can reduce competition or put small innovators at a disadvantage.
Murino said the government will now be holding broad consultations on the draft rules.
The Treasury has launched the bill for feedback until October 24th.
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