Australia is making significant strides toward creating a comprehensive regulatory framework for the cryptocurrency industry, as outlined in the Treasury’s initiative to cultivate an innovative digital asset landscape.
The Treasury emphasized that this initiative is intended to enhance consumer protection, mitigate risks, and provide essential clarity for the sector.
Regulatory Framework
As part of the proposed framework, specific cryptocurrency businesses will be integrated into existing financial services regulations.
This encompasses exchanges, custodians, and stablecoin issuers, all of which will be required to secure an Australian Financial Services License (AFSL) for legal operation. These entities will also adhere to new regulations tailored to the unique characteristics of digital assets.
The Treasury highlighted that these initiatives are crucial for minimizing risks related to custody, liquidity, counterparty interactions, fraud, and cybersecurity. Additionally, companies dealing with tokenized stored-value products—such as stablecoins used in transactions—must comply with stringent prerequisites.
Such requirements will include protections for consumer assets, protocols for redemption, and support for liquidity, akin to the standards for traditional non-cash payment systems.
While these regulations aim to provide more order to the industry, not every crypto-related entity will be encompassed within this new framework. Developers working on non-financial blockchain applications and those involved in building or maintaining decentralized protocols will not be subject to the new rules.
Moreover, smaller startups that do not satisfy the proposed criteria could also be exempt, although they may still need to comply with certain minimal regulations.
The Treasury has indicated that a draft version of the legislation will be available for public feedback later this year. Contributions from the Australian Securities and Investments Commission (ASIC) will play a vital role in finalizing the framework.
Broader Reforms
In addition to licensing, the government is considering broader reforms related to cryptocurrencies. These reforms include a new Crypto Asset Reporting Framework (CARF) and strategies to address debanking challenges faced by numerous crypto firms.
“De-banking can severely affect businesses and individuals who find themselves unable to access banking services. It can hinder competition and innovation within the financial services landscape and negatively influence Australia’s economy.”
Furthermore, regulators are evaluating the implications of tokenization laws and the potential introduction of a Central Bank Digital Currency (CBDC).
Meanwhile, the Enhanced Regulatory Sandbox (ERS) will be reviewed in 2025. This sandbox enables businesses to experiment with financial services and credit innovations without the necessity for a license, promoting safe experimentation within Australia’s fintech ecosystem.
