The Australian government has unveiled a proposal to introduce more rigorous regulations for cryptocurrency trading platforms, with a primary focus on enhancing the oversight of customer funds. The proposal, revealed on Monday, suggests that digital asset platforms should be subjected to the same laws that govern other financial services providers, as reported by the Wall Street Journal.
As part of this plan, operators of cryptocurrency platforms will be required to secure a financial services license, along with a regime of ongoing monitoring and routine audits of customer funds.
Australian Treasurer Jim Chalmers stated, “The government is taking a systematic approach to ensure the adequate protection of consumers and the promotion of innovation.” He also emphasized that these proposed regulations align with measures already implemented in various other jurisdictions.
Tighter regulations have become a necessity due to the recent failures of high-profile cryptocurrency firms. The collapse of FTX, a cryptocurrency exchange, in November 2022 highlighted significant vulnerabilities in the industry.
At the time of its downfall, FTX held a substantial 218.6 million Australian dollars (equivalent to US$137.7 million), which belonged to 24,656 local customers, as reported by local bankruptcy administrator KordaMentha. Notably, FTX had previously held an Australian Financial Services license, which was subsequently suspended by regulators. FTX’s founder, Sam Bankman-Fried, is currently facing trial in the United States, with prosecutors alleging his involvement in the theft of billions of dollars from customers for personal enrichment, venture investments, and political campaign contributions. Bankman-Fried has pleaded not guilty to all charges.
The cryptocurrency sector in Australia has been under increasing scrutiny. In May, cryptocurrency exchange Binance Australia informed customers that they would lose access to Australian dollar deposits and withdrawals due to a decision made by its third-party service provider. In July, officials from the Australian Securities and Investments Commission (ASIC) conducted searches at Binance Australia’s offices.
Additionally, in March, Australia’s prudential regulator instructed banks to report their exposures to crypto firms and startups, particularly in the wake of the Silicon Valley Bank’s collapse, which caused turmoil in the banking sector. The Australian Prudential Regulation Authority (APRA) requested local banks to enhance their reports on crypto assets and provide daily updates to the regulator, aiming to gain deeper insights into potential vulnerabilities in the financial system.
In response to the increasing restrictions on crypto payments, Blockchain Australia, an industry body representing the blockchain and digital currency industry in Australia, has launched a series of initiatives to combat crypto scams and fraud. These initiatives include educational programs, roundtables, and various other measures aimed at promoting safety and transparency in the crypto industry.