Australia Unveils Plans for Fresh Licensing Framework for Cryptocurrency Exchanges, Targets Draft Legislation by 2024

Australia has set a clear timetable for its cryptocurrency regulatory framework, with draft legislation focusing on licensing and custody regulations for crypto service providers expected by 2024. Following the legislation’s enactment, cryptocurrency exchanges will have a one-year transition period to comply with the new regulatory requirements, according to an announcement from Australia’s Treasury on Monday.

The outlined schedule suggests that it may take until 2025 for an Australian digital asset platform to secure a license under this proposed framework. This development marks a significant stride by the Australian government in shaping its cryptocurrency regulatory policies.

The initial announcement of this proposal was made in February 2023, with expectations for a mid-2023 release. The delayed release of the consultation paper in October is separate from an earlier token mapping consultation paper, which focuses on categorizing key activities and functions of crypto products within existing regulatory frameworks.

The publication of the proposal coincided with a speech by Australia’s Assistant Treasurer and Minister for Financial Services, Stephen Jones, at The Australian Financial Review Crypto Summit (AFRCM). Details regarding the proposal’s content were first reported by AFR.

Australia has been awaiting regulatory clarity for digital assets, with the aim of catching up with global cryptocurrency regulations. Michael Bacina, a digital asset lawyer at Piper Alderman and Chair of Blockchain Australia, emphasized the consumer-centric approach of the proposal, which intends to encompass various business models currently unregulated. Even NFT marketplaces that hold customer assets may require licensing.

The proposal released on Monday suggests that all cryptocurrency exchanges holding more than AUD 1,500 ($946) of a single client or over AUD 5 million ($3.15 million) in total assets would need an Australian Financial Services license granted by the Australian Securities and Investments Commission (ASIC). The proposal includes 32 themes and seeks written submissions by December 1, 2023.

Adam Percy, General Counsel of Swyftx, a local cryptocurrency exchange, expressed the desire for a level playing field between national and overseas crypto platforms. Percy noted that the government’s consultation process was thoughtful, with a focus on ensuring appropriate protections and room for innovation.

Furthermore, the Treasury and Reserve Bank of Australia will jointly publish a report in mid-2024. This report will offer an overview of central bank digital currency (CBDC) research in Australia and outline a roadmap for future CBDC work, according to Dr. Brad Jones, Assistant Governor (Financial System) at the Reserve Bank of Australia. Earlier this year, Australia decided to delay a decision on CBDC due to unresolved issues following a pilot project