Kraken Australia’s Director Jonathon Miller does not support the proposed rules, stating that the paper was trying to fit crypto into existing financial services regulations.
The Australian Treasury has unveiled a consultation paper that details plans to regulate crypto exchanges in the country. The new regulatory framework – released on October 16 and titled “Regulating Digital Asset Platforms” – would require cryptocurrency exchanges to apply for financial services licenses from the local regulator. The Treasury asserts that the framework aims to foster innovation in the digital asset sector while ensuring that consumer rights are upheld.
The regulatory framework is designed to focus regulatory efforts at the exchange level, regulating service providers such as crypto exchanges instead of individual digital assets and tokens. Under the proposed framework, crypto exchanges would be regulated under the current financial services laws and not specially crafted crypto-focused laws. In addition, crypto exchanges holding more than A$5 million ($3.2 million), or more than A$1,500 ($946) per client, would be required to obtain an Australian Financial Services Licence (AFSL) from the Australian Securities and Investment Commission (ASIC).
The consultation paper is seeking feedback on its questions and regulation proposals. The deadline for submitting feedback is December 1, 2023.
The paper has received a rather mixed reaction from crypto businesses operating locally, with some like crypto exchange Swyftx’s general counsel Adam Percy supporting it. Percy called the proposal “thoughtful” and added that “the primary focus should be to make sure cryptocurrency users can access blockchain technology with appropriate protections and that there’s room for innovation”.
On the other hand, Kraken Australia’s Director Jonathon Miller does not support the proposed rules, stating that the paper was trying to fit crypto into existing financial services regulations.
“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,” Miller said. “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.”
Miller expressed interest in collaborating with the Australian government to ensure that regulation does not stifle the benefits of future innovations in the crypto sector that might not be in line with traditional, pre-existing financial services rules.
Liam Hennessy, a partner at Clyde & Co law firm, pointed out that although the Treasury appears to be “grappling” with all the different types of assets and service providers in the industry, it is important to bear in mind that all proposals brought forward by the consultation paper were only proposals and therefore, not legally binding recommendations.
“Whatever the Treasury suggests, it is just that – a suggestion only. The Government is not bound to follow its recommendations, and there will be lobbying once the consultation paper comes out,” he stated.
He also asserted that the consultation paper ignores more pressing issues such as the recent spike in de-banking, noting that “many licensed digital assets exchanges, both domestic and international, are struggling to find adequate banking arrangements”.
Non-financial tokens such as those used in gaming and NFTs are expected to remain unregulated. The exchanges that deal with such tokens will still be required to possess AFSLs. The proposal also seeks to put in place certain standards around trading, staking, and fundraising for non-financial products.