Australia Proposes New Cryptocurrency Regulation Ahead of Federal Election

Canberra, Australia – Australia’s government, led by the center-left Labor Party, has unveiled a comprehensive proposal to regulate cryptocurrency exchanges under existing financial services laws. This initiative aims to clarify the legal framework for digital assets and address the growing issues surrounding debanking, ahead of a crucial federal election anticipated on or before May 17. ## Key Features of the Proposed Framework

In a statement released by the Treasury Department on March 21, it was announced that key players in the cryptocurrency market, including exchanges, custody services, and certain brokerage firms involved in trading or storing cryptocurrencies, will be subject to the new regulations. The proposed regime is designed to align the compliance requirements for these entities with those currently enforced on other financial services in Australia. This includes mandatory rules for safeguarding customer assets, obtaining an Australian Financial Services License, and adhering to minimum capital requirements.

The Treasury outlined four main priorities for the new regulatory framework, emphasizing the government’s intention to extend existing financial laws to crucial digital asset platforms while exempting smaller or startup platforms that do not meet specific size criteria. Additionally, firms engaged in the development of blockchain-related software or the creation of digital assets that do not qualify as financial products will also be excluded from these new laws.

Stablecoins and Market Activities

In a significant move, the Treasury stated that payment stablecoins will be classified as a type of stored-value facility under the government’s Payments Licensing Reforms. However, certain stablecoins and wrapped tokens will be exempt from this categorization. Furthermore, the Treasury clarified that trading in these products will not be considered as operating within the confines of a market, thus providing more clarity for platforms involved in their exchange.

Addressing Debanking Issues

As part of a broader agenda, the Albanese government has committed to collaborating with Australia’s four largest banks to gain insights into the extent and implications of de-banking affecting cryptocurrency entities. The government also plans to conduct a review of the potential for a central bank digital currency (CBDC) and to introduce an Enhanced Regulatory Sandbox by 2025. This sandbox will enable businesses to test innovative financial products without the immediate necessity of a license.

Upcoming Legislation and Political Landscape

The government is expected to release a draft of the proposed legislation for public consultation. However, the political landscape remains uncertain, as a federal election looms on the horizon. Current polling indicates a tight race between Prime Minister Anthony Albanese’s Labor Party and the opposing center-right Coalition led by Peter Dutton. An earlier announcement from the Coalition indicated that they would also prioritize crypto regulation if they were to emerge victorious in the elections.

Polls conducted by YouGov as of March 20 show the Coalition and Labor neck and neck in terms of two-party preferred votes, although Albanese continues to be favored as the preferred prime minister.

Industry Reactions

Industry leaders have expressed diverse opinions regarding the proposed framework. Caroline Bowler, CEO of the local crypto exchange BTC Markets, called the reform areas sensible and vital for maintaining Australia’s competitiveness in the global market. However, she highlighted the need for more detailed guidelines on capital adequacy and custody requirements to avoid placing excessive burdens on businesses.

Jonathon Miller, Managing Director at Kraken Australia, emphasized the urgent need for tailored cryptocurrency legislation to clarify existing ambiguities within the industry. He noted that establishing a clear regulatory framework could help address issues like debanking and foster growth within the Australian economy.

As the election date approaches, the unfolding developments in cryptocurrency regulation could play a pivotal role in shaping Australia’s financial landscape, with significant implications for local businesses and potential international investment in the sector.