Followers of the Australian cryptocurrency scene knew that changes were coming, and they are dominating cryptocurrency news. With the federal election on the horizon, shifts have come down that will make things look just a bit different for custody services, brokerage firms, and crypto exchanges in the country.
What do these changes mean and how will they affect things? Let’s take a deeper look into what these changes are, how they are impactful, and why they are relevant as Australia gears up for its federal election in May.
The Coming Federal Election
In Australia, a vote is held every three years to determine who will from the next Federal Government and Parliament. This group will be responsible for making decisions and laws that impact all of Australian.
In early May, the Australian federal elections will take place. Australians will be responsible for voting on who will be an electorate in the House of Representatives, plus different Senators. Finally, the vote for Prime Minister will be held as well, giving the people the opportunity to vote at the local, state, and federal level.
It is important to do your research and know who you plan to vote for. There is information about each candidate, the party they represent, and what policies they are speaking on. Your right to vote is important, don’t let it go to waste.
New Regulations for Crypto Exchanges, Custody Services, and Brokerage Firms
The Treasury Department revealed on March 20 that it is imposing stricter regulations when it comes to both issuers of stablecoins as well as cryptocurrency exchanges. The proposal comes as the government looks to improve its oversight of the digital assets space. The goal is to ultimately broker a balance between protecting consumers and fostering financial innovations. The inherent risks within the digital assets sector remain a challenge to the industry as a whole.
Led by the Labor Party, Australia’s government will regulate its cryptocurrency exchanges and any related firms under current financial services laws. That includes enacting tighter compliance requirements similar to those that traditional financial institutions already face.
Custody services, crypto exchanges, and select brokerage firms – those involved in storing or trading cryptocurrencies – will have to adhere to the framework that conventional financial beings do. These entities will be required to obtain an Australian Financial Services (AFS) license, while also following complex rules to protect consumer assets, and even have minimum financial reserves.
Extending Existing Financial Services Laws
In a statement from the Treasury Department, the organization clarified that these aren’t necessarily “new” laws, but more of an extension on the current financial services laws into the most critical digital asset platforms.
It should be noted that smaller platforms – the ones that don’t meet certain size thresholds – will remain exempt from being categorized as such. Companies that are creating digital assets or developing blockchain technology will not fall under this umbrella either because they aren’t counted as being financial products.
Stablecoins and Debanking
Perhaps one of the most notable aspects of the announcement from the Treasury Department is its proposed treatment when it comes to stablecoins. These coins are considered to be less volatile than new offerings to the market.
Under the Payments Licensing Reforms coming from the Australian government, stablecoins will be categorized as stored-value facilities. Some wrapped tokens and stablecoins won’t be eligible to fall under this classification. For instance, the Treasury clarified that trading with these assets won’t necessarily classify platforms as market operators who are operating within a regulated trading environment. This point was highlighted to provide scope for these new regulations.
Debanking has become a major focal point as well. The practice of debanking refers to a bank or financial institution simply closing out a customer account with providing a detailed explanation or even any explanation at all. Sometimes, this action can be taken when there are concerns about financial crime, reputational damage to the institution, risk management, or simply for regulatory compliance.
Having said that, debanking presents a number of challenges for customers. Not every customer facing account closure has done something wrong and even banking systems can make mistakes. This has been a rising issue in the financial space.
In response, the Treasury Department is addressing debanking in the crypto sector. Major financial institutions have been able to either restrict or terminate services to crypto firms in the past. Under Albanese, the government is working with the four largest banks in Australia to address the issue.
The goal is to take a look at the overall scope of debanking, plus the nature of the practice, as a whole. The necessity for improved financial access, especially when it comes to firms that are currently operating within the digital assets space, has been emphasized.
Another part of the framework will include plans to review central banking digital currency (CBDC). The Treasury Department has proposed that an Enhanced Regulatory Sandbox be established at some point in 2025. By doing this, businesses would be able to trial new financial products within a controlled environment without having to acquire a license. This should help to foster innovation within the industry while also ensuring that financial institutions remain compliant as well.
The Election Will Have Major Implications on the Australian Crypto Market
Because of these significant changes, the Australian government has announced that it will release a draft of the coming legislation so that it can be consulted by the public. This will open up discussion as it pertains to regulatory changes and how it impacts industry stakeholders.
The election race between Prime Minister Anthony Albanese and the Labor Party compared to the Peter Dutton-led Coalition has been as tight as can be. Each side has been speaking on the crypto market and how they plan to address growing concerns.
The Coalition has pledged to make crypto regulation a priority should they win. As a result, this could see a shift in the regulatory agenda that has been proposed as the Coalition explores a solid approach when it comes to digital assets and currencies.
Collaborative Efforts
Major names within the Australian cryptocurrency space have already spoken on the proposed changes and reforms. CEO of BTC Markets Carolin Bowler noted that these changes are quite sensible and that it should help to keep Australia in lockset with other global peers. She did note that clarity around custody and capital adequacy requirements would be necessary.
Jonathon Miller, the managing director of Kraken Australia, stressed that there is a pressing need when it comes to addressing pre-existing uncertainties when it comes the crypto landscape in Australia. Miller stated that there needs to be legislation specifically tailored to these challenges.
Australia is looking to establish clearer regulations on crypto by creating a collaborative pilot program with the Reserve Bank of Australia (RBA), Securities and Investments Commission (ASIC), and the Australian Treasury.
While this is a big move for the Australian cryptocurrency market, there is no news on retail CBDC at this point. Wholesale CBDC should be valuable enough to support potential upgrades when it comes to new technologies and market infrastructure. The landscape for cryptocurrencies in Australia is about to experience a major change, hopefully for the betterment of everyone.
