Australia is set to enhance regulations for crypto service providers through draft legislation aimed at applying finance sector laws to crypto exchanges.
During a crypto conference on Thursday, Assistant Treasurer Daniel Mulino stated that this legislation is “the cornerstone of our digital asset roadmap,” which the Albanese Government unveiled in March.
“This is a preliminary draft of the legislation, and we are welcoming feedback from stakeholders on its clarity and effectiveness before moving forward,” he noted.
At present, crypto exchanges that facilitate trading of assets like Bitcoin (BTC) only need to register with the Australian Transaction Reports and Analysis Centre (AUSTRAC), which currently lists 400 registered crypto exchanges, many of which are inactive.
Draft law to introduce two new financial products
Mulino indicated that the draft legislation aims to establish two new financial products under the Corporations Act: a “digital asset platform” and a “tokenized custody platform.”
“This will require service providers of digital asset platforms and tokenized custody platforms to hold an Australian Financial Services License,” he remarked.
This license will ensure that all exchanges are registered with the Australian Securities and Investments Commission. At this time, only exchanges providing “financial products,” such as derivatives, are mandated to register with the corporate regulator.
Mulino further noted that the legislation includes “targeted rules for key activities,” such as wrapped tokens, public token infrastructure, and staking.
Crypto platforms will also be bound by “a suite of obligations designed to reflect the unique characteristics of digital assets,” Mulino stated, including standards for holding crypto and processing transactions.
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“The failures of digital asset businesses have underscored consumer risks, particularly when operators withdraw and hold client assets without reliable safeguards,” he added.
“This is about legitimizing the good actors and excluding the bad. It’s about providing certainty for businesses and confidence for consumers.”
Severe penalties, but “low risk” platforms exempt
Violations of the law are expected to incur penalties of up to 16.5 million Australian dollars ($10.8 million), three times the benefit gained, or 10% of annual turnover—whichever is higher, as stated in a Treasury press release.
Platforms categorized as “smaller, low-risk,” which manage less than 5,000 Australian dollars ($3,300) per customer and facilitate under 10 million Australian dollars ($6.6 million) annually, will be exempt from these regulations.
The Treasury mentioned that this exemption aligns with the treatment of financial products like non-cash payment facilities, asserting that the legislation does not aim to implement new rules on crypto issuers or on those creating or using crypto for non-financial reasons.
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