Australia plans to require crypto exchanges to obtain licenses to curb risks

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BLOOMBERG – CRYPTO exchanges in Australia will soon be required to hold a financial services license issued by the market regulator as the country seeks to support the growth of digital assets while protecting consumers.

A government proposal that builds on existing laws will mean digital-asset platforms that hold more than A$5 million (S$4.4 million), or A$1,500 for an individual, must get a permit from the Australian Securities and Investments Commission or ASIC, according to a Treasury Department document Monday.

Rules will also include custody and transaction standards that the government said are inspired by frameworks used in the UK, Canada, and Singapore.

A range of jurisdictions have stepped up efforts to regulate digital assets after a US$1.5 trillion crypto rout last year that exposed risky practices and triggered the collapse of high-profile trading venues.

Chief among the wipeouts was the bankruptcy of Sam Bankman-Fried’s FTX exchange, with the fallen mogul now on trial in the US for allegedly overseeing a multibillion-dollar fraud.

The UK intends to regulate cryptoasset activities including trading, lending, and custody under the same regime as traditional financial services. In Canada, firms are required to follow tougher regulations on segregating customer assets and are prohibited from offering margin or leverage.

Singapore, meanwhile, is curbing retail-investor participation in crypto-related trading and investment while seeking to develop a hub for productive uses of blockchain technology, such as tokenizing real-world assets.

The Australian government will consult on its plans until Dec 1. Draft legislation is expected next year, followed by a period of 12 months to allow exchanges to ensure they are compliant with the new rules.

Existing law

The obligations for firms are drawn from existing law for financial services, the government said, including submitting financial records, monitoring market misconduct, and meeting solvency and cash reserve requirements.

This marks “a positive progression for the crypto industry,” Caroline Bowler, chief executive officer at crypto platform BTC Markets Pty, said in a statement. “It is imperative the country keeps pace with our international peers, with a robust regulatory framework.”

The proposals also mean more obligations in areas such as trading, staking, and the creation of tokens. Staking involves earning rewards by pledging coins to help run a blockchain.

Australia’s big banks this year have restricted access to digital-asset platforms due to concerns about risks from scams. ASIC has also been probing the Binance Australia exchange’s now-defunct local derivatives business.

Image by: Pixabay
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