The Australian government has proposed a new regulatory framework for crypto assets. The framework is designed to protect consumers from harm, legitimize the crypto sector, and support innovation. The full document can be found here where you can review the proposed framework and have your say.
“The new digital asset facility product will provide a clear and consistent regulatory framework for Australian businesses to offer their customers access to crypto assets. This will help to support innovation in the sector and make it easier for Australians to invest in crypto assets in a safe and regulated way.”
Stephen Jones, Minister for Financial Services
Key points of the proposed framework
- DASPs will be required to hold an AFSL and comply with all relevant financial services laws. This will ensure that DASPs meet high standards of consumer protection and financial system integrity.
- A new type of financial product called a ‘digital asset facility’ will be introduced. This will provide a clear and consistent regulatory framework for businesses to offer their customers access to crypto assets.
- The framework will include measures to address consumer harms, such as requiring DASPs to hold adequate capital and liquidity, and to implement robust cybersecurity measures. This will help to protect consumers from financial losses and other risks associated with crypto assets.
Industry commentary
The proposed regulatory framework has been met with mixed reactions from the industry. Some stakeholders have welcomed the move, arguing that it will provide much-needed clarity and certainty for businesses and consumers alike. Others have expressed concerns that the framework is too restrictive and could stifle innovation.
“The AFSL regime is a well-established and effective regulatory framework that has protected Australian consumers for many decades. By leveraging the AFSL regime, we can ensure that DASPs are subject to the same high standards of regulation as other financial services providers.”
ASIC Chair, Joe Longo
Proponents of the framework argue that it will:
- Protect consumers from harm. By requiring DASPs to meet high standards of regulation, the framework will help to prevent consumers from being misled or exploited.
- Legitimise the crypto sector. By bringing DASPs under the umbrella of the financial services regulatory regime, the framework will help to create a more trusted and transparent environment for crypto businesses and investors.
- Attract more institutional investors and boost the growth of the sector. By providing a clear and consistent regulatory framework, the framework will make it easier for institutional investors to invest in crypto assets.
- Support innovation. The framework will provide a clear regulatory framework for businesses to operate in, which could help to foster innovation in the crypto sector.
Critics of the framework argue that it:
- Is too restrictive and could stifle innovation. The AFSL licensing process can be complex and expensive, which could make it difficult for small startups to comply with the requirements.
- Does not go far enough to protect consumers. Some critics argue that the framework should require DASPs to provide insurance for their customers’ funds.
Quotations from the Australian government’s proposed crypto regulation framework
“The Australian Government is committed to protecting consumers from harm and supporting innovation in the crypto sector. This proposed regulatory framework strikes a balance between these two objectives.”
Jim Chalmers, Treasurer of Australia
Regulating digital asset platforms | Treasury.gov.au
The Australian crypto industry has been divided in its response to the proposed crypto regulation framework. Some stakeholders have welcomed the move, arguing that it will provide much-needed clarity and certainty for businesses and consumers alike. Others have expressed concerns that the framework is too restrictive and could stifle innovation.
Proponents of the framework
- Blockchain Australia Association: “We welcome the Australian Government’s commitment to regulating the crypto sector in a way that protects consumers and supports innovation. The proposed framework is a step in the right direction, and we look forward to working with the Government to ensure that it is implemented effectively.”
- Australian Financial Review: “The proposed crypto regulation framework is a boon for consumers and businesses alike. It will help to protect consumers from harm and make it easier for businesses to operate in the crypto sector. This could help to attract more institutional investors and boost the growth of the sector.”
Critics of the framework
- CoinDesk: “The proposed crypto regulation framework is a missed opportunity. It does not go far enough to protect consumers and it could stifle innovation. The Government should have done more to consult with the industry and to develop a framework that is more supportive of innovation.”
- KPMG: “The proposed crypto regulation framework is too restrictive and could stifle innovation. The AFSL licensing process is complex and expensive, which could make it difficult for small startups to comply with the requirements. The Government should consider making the framework more flexible and accessible to small businesses.”
The Australian crypto industry is divided in its response to the proposed crypto regulation framework. Some stakeholders believe that it is a positive step for the sector, while others believe that it is too restrictive and could stifle innovation. It remains to be seen how the framework will be implemented and what its long-term impact on the Australian crypto sector will be. At this early stage we have yet to see formal responses from the likes of Australian based exchanges such as Coinspot and Swytfx.
