Australia is drafting legislation to tighten the oversight of crypto exchanges, marking a significant step towards regulating the digital asset sector. The draft legislation aims to extend finance sector laws to crypto exchanges. Assistant Treasurer Daniel Mulino announced the reforms on Wednesday at the Digital Economy Council of Australia's Global Digital Asset Regulatory Summit. Mulino described the bill as the “cornerstone” of the government's digital asset roadmap, published in March, and said it would align Australia with international peers.
The proposed regulatory framework is designed to provide greater clarity for industry participants while addressing risks tied to consumer protection and market integrity. The reforms will require major crypto platforms to obtain an Australian Financial Services Licence. This move is part of the Albanese Government's broader digital asset roadmap, which was outlined in March.
The draft legislation would create two new financial products under the Corporations Act: a “digital asset platform” and a “tokenized custody platform”. Service providers dealing with these platforms will need to hold an Australian Financial Services Licence. The licence would register all exchanges with the Australian Securities and Investments Commission. Currently, only exchanges that sell “financial products,” such as derivatives, must register with the corporate regulator.
The draft legislation also includes specific rules for critical crypto activities, including wrapped tokens, public token infrastructure, and staking. These rules are designed to accommodate the unique characteristics of digital assets, such as how they are held and transactions are settled. Mulino emphasized that the legislation aims to protect consumers by addressing risks associated with digital asset businesses. In particular, he noted the dangers when crypto platforms pull and hold client assets without adequate safeguards. The goal is to separate responsible operators from those who pose risks to consumers and the broader financial system.
Currently, crypto exchanges that simply facilitate trading assets like Bitcoin need only register with the Australian Transaction Reports and Analysis Centre (AUSTRAC). AUSTRAC has reported 400 crypto exchanges registered on its books, many of which are inactive.
The Australian government consulted on proposed reforms to the regulation of the Australian payments service providers in early 2024, which would mean more products and activities will be regulated under the AFSL regime. These could include crypto based payment arrangements such as payment stablecoin arrangements.
