Australia is aiming to tighten regulations around crypto service providers, with draft legislation that would extend finance sector laws to crypto exchanges.
Assistant Treasurer Daniel Mulino told a crypto conference on Thursday local time that the legislation is โthe cornerstone of our digital asset roadmap,โ which the Albanese Government released in March.
โThis is a preliminary version of the legislation, and we are seeking stakeholder feedback on its effectiveness and clarity before proceeding further,โ he said.
Currently, crypto exchanges that simply facilitate trading assets like Bitcoin (BTC) need only register with the Australian Transaction Reports and Analysis Centre (AUSTRAC), which has reported 400 crypto exchanges registered on its books, many of which are inactive.
Draft law to make two new financial products
Mulino said the draft legislation would create two new financial products under the Corporations Act, a โdigital asset platformโ and a โtokenized custody platform.โ
โThis means digital asset platform and tokenized custody platform service providers will need to hold an Australian Financial Services Licence,โ he said.
The licence would register all exchanges with the Australian Securities and Investments Commission. Currently, only exchanges that sell โfinancial products,โ such as derivatives, must register with the corporate regulator.
Mulino added that the legislation has โtargeted rules for key activities,โ such as wrapped tokens, public token infrastructure, and staking.
Crypto platforms will also be subject to โa suite of obligations designed to accommodate the unique characteristics of digital assets,โ Mulino said, including standards for holding crypto and settling transactions.
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โFailures of digital asset businesses have highlighted the consumer risks, particularly where operators pull and hold client assets without consistent safeguards,โ he added.
โThis is about legitimizing the good actors and shutting out the bad. It is about giving businesses certainty and consumers confidence.โ
Heavy penalties, but โlow riskโ platforms exempt
Breaches of the law are set to carry penalties of up to 16.5 million Australian dollars ($10.8 million), three times the benefit obtained or 10% of annual turnover โ whichever is greater โ according to a Treasury press release.
Platforms dubbed as โsmaller, low-risk,โ which hold less than 5,000 Australian dollars ($3,300) per customer and facilitate less than 10 million Australian dollars ($6.6 million) a year, will be exempt from the rules.
The Treasury said the exemption is consistent with the approach to financial products such as non-cash payment facilities, adding the legislation doesnโt look to impose new rules on crypto issuers or those that create or use crypto for non-financial purposes.
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