Introduction to Crypto Regulation in Australia
Crypto exchanges and firms coping with digital assets in Australia would now not find a way to avoid costly licensing under proposed guidance from the country’s corporate regulator. The Australian Securities and Investment Commission (ASIC) released a consultation paper on proposed guidance for crypto, placing many digital assets under the category of economic products requiring that almost all firms dealing in crypto have to be licensed.
The Impact on Crypto Firms
“It’s a little bit of a wake-up call,” said Kate Cooper, CEO of Australia and head of APAC on the Standard Chartered-backed crypto custodian Zodia Custody. “Compliance really is not any longer optional for the industry, and numerous the players, each local and international, are going to have to actually have a look at and take an audit of what they’re doing from a custody and compliance management perspective.” In Australia, businesses offering financial services and dealing in financial products need an Australian Financial Services License (AFSL), while platforms facilitating the trading of economic products may need an Australian Market License.
Licensing Requirements
The latest guidance would require crypto exchanges and plenty of other crypto firms to get one or each licenses. Some worry that ASIC’s draft guidance could hang crypto startups out to dry and cause an exodus of crypto firms from the country. “Obviously, the larger businesses can be higher able to face up to all of that regulation, all of that legal cost, compliance cost that’s related to it. Smaller businesses may struggle,” said Liam Hennessy, a partner at Clyde and Co law firm and adjunct professor on the University of Sydney.
Concerns from the Crypto Community
Joni Pirovich, a crypto lawyer, wrote on LinkedIn that the updated guidance will make launching in Australia “on par or dearer than launching offshore.” Block Earner co-founder and CEO Charlie Karaboga, who was sued by ASIC for offering an unlicensed crypto-yield product in 2022, said it was an “amazing direction around clarity” but shared concerns about his business, which has just 13 employees. “I feel ASIC underestimates the necessities needed to be met for an AFSL,” Karaboga said, adding that firms have to hold hundreds of thousands of dollars on their balance sheets.
Clarity for the Crypto Industry
The silver lining, in keeping with the executives, is that the regulator has finally released much-needed clarity for crypto — even whether it is harsh. “It is a big piece of regulatory guidance to the market,” said Hennessy. “Anything which provides regulatory clarity is a great thing for the market.” ASIC is considering a big expansion of what it considers a financial services or products, including stablecoins, native token staking services, exchange tokens, and wrapped tokens.
Conclusion
In conclusion, the proposed guidance from ASIC is a big development for the crypto industry in Australia. While it might pose challenges for smaller businesses and startups, it provides much-needed clarity and regulatory framework for the industry. The final version of the guidance is predicted to are available in mid-2025 after considering the feedback. As ASIC Commissioner Alan Kirkland said, “We wish to promote the expansion of responsible financial innovation while ensuring consumer protection.” The crypto industry in Australia will likely undergo significant changes in the approaching months, and it stays to be seen how businesses will adapt to the brand new regulations.
