This week the Commonwealth Treasury released a new consultation paper on regulating crypto exchanges, outlining a proposed framework to address the significant risks and potential harms associated with these platforms, while fostering innovation and safe usage of digital assets.
The paper proposes to regulate digital asset platforms within the existing Australian financial services laws, while ensuring all consumers and businesses have the opportunity to safely explore and share in any benefits of the technology.
Key features of the proposed regulatory framework include:
- Requiring digital asset platforms to obtain an Australian Financial Services Licence (AFSL);
- Regulating digital asset holding arrangements as a new 'digital asset facility';
- Imposing specific obligations on digital asset platforms, such as customer due diligence, know-your-customer (KYC) checks, and safe custody requirements;
- Establishing a new licensing and oversight regime for digital asset platforms; and
- Introducing new consumer protection measures, such as a complaints handling scheme and a compensation scheme of last resort.
The Treasury has invited stakeholders to provide feedback on the proposed regulatory framework by 1 December 2023.
The release of the consultation paper is a significant development in the Australian government's approach to regulating digital assets. It is the first time that the Treasury has proposed a comprehensive regulatory framework for digital asset platforms.
The release of the consultation paper is a welcome development for digital asset industry participants. It provides much-needed clarity on the government's regulatory intentions and gives industry participants the opportunity to provide input into the development of the regulatory framework.
Industry participants should carefully review the consultation paper and assess the impact of the proposed framework on their businesses. They should also consider making submissions to the Treasury by the deadline of 1 December 2023.
