- Australia has been relatively progressive in allowing crypto to flourish.
- Now, in the wake of the FTX crash and other scandals, the government is looking to bring digital assets into scope of existing financial regulation.
The Australian government has made another push to bring crypto under the umbrella of its securities laws, something the digital assets industry said will jeopardise thousands of jobs.
In a consultation opened this week, the Australian Treasury sought feedback on regulating crypto exchanges and other intermediaries.
“The aim of this simple framework is to protect consumers while ensuring appropriate guardrails are in place within which to safely foster innovation,” the consultation says.
New licence
While Australia has previously been at the forefront of opening up its market to crypto, the government has flagged that it will crack down on the industry after a series of highly publicised scandals and scams last year.
Under the proposal, service providers would have to register with authorities under a new category called a “digital asset facility.” They would also have to obtain an Australian Financial Services License, the same permit that governs other kinds of financial securities businesses.
“The proposal establishes a framework to apply for a licence,” Michael Silberberg, head of investor relations at crypto hedge fund Alt Tab Capital, told DL News. “This in turn allows retail investors to see certification and hopefully allows them to avoid scam platforms.”
The proposal is similar to the stance taken by Gary Gensler, the chair of the US Securities and Exchange Commission, who has long contended digital assets can be regulated the same as stocks or bonds.
Indeed, some industry participants in Australia criticised the initiative as an attempt to force digital assets into a framework designed for securities.
“Australia is now in the unfortunate situation where our regulation has taken a very long time, so we’re taking the approach of shoehorning crypto into existing financial services regulation,” Jonathon Miller, managing director of Kraken Australia, told The Block
“We’re behind our global peers when it comes to implementing a crypto framework, so I appreciate the need to have something in place locally to provide certainty to platforms like ours.”
Others, however, welcomed the plans, saying that they brought much-needed rules of the road for crypto service providers.
Silberberg is among the latter group. He said the proposal clearly defines a transition period that will allow crypto asset providers and the financial services industry to prepare for when the rules kick in.
“If a domicile gives a set of rules for crypto assets, you no longer [try] to comply by shoehorning yourself in with unclear licence frameworks,” he said.
Cracking down
Australia has been fairly progressive in allowing citizens to trade crypto. In 2017, the government declared that crypto was legal, and that Bitcoin was subject to capital gains tax.
From 2018, crypto exchanges have had to register with the Australian Transaction Reports and Analysis Centre, under which they must comply with anti-money laundering and counter-terrorism financing obligations.
By 2022, about a quarter of the country owned some form of crypto, according to market research from exchange Swyftx.
But with concerns about terrorist financing, scams, and the high-profile collapse of FTX and other exchanges in 2022, the government signalled that a crypto crackdown was coming. The government estimates that some 50,000 Australian consumers lost money in the FTX crash.
In an interview with the Sydney Morning Herald early this year, finance minister Stephen Jones said crypto should be regulated like any other security.
“I’m not attracted to setting up a completely separate regulatory regime for something that is, for all intents and purposes, a financial product,” he said.
Australian authorities supported the idea of legislation that would classify all crypto assets as financial products.
Moving overseas
But the industry did not agree. Blockchain Australia, which counts Binance and Ripple among its members, argued that blanket regulation would fail to capture the nuances of crypto’s differences from traditional finance, killing innovation in the sector.
Blockchain Australia CEO Simon Callaghan told DL News earlier this year that the industry is fighting for its future.
“We would lose jobs,” Callaghan said then. “Businesses would move overseas. They would move to Singapore. They would move to Hong Kong. They would move to Dubai and Abu Dhabi.”
In 2021, the industry contributed $2.1 billion to the Australian economy and employed 11,600 people, according to an EY report, which estimated those figures may rise to $68.4 billion and 200,000 people by 2030.
Feedback on the consultation must be submitted by December 1.
Contact the author on joanna@dlnews.com or Telegram @joannallama.