Did you know that there are 427 Digital Currency Exchanges (DCEs) in Australia, but AUSTRAC, the nation’s financial watchdog, is concerned about most of them being inactive?
As per recent updates, AUSTRAC has urged inactive DCEs to willingly withdraw their registration or risk having it cancelled. “Use it or lose it” appears to be the ideology behind this move, but it’s not being implemented just to clean the registry. The underlying aim of this initiative is to curb illicit activities, improve the integrity of the financial system, and ensure customer protection.
What does the AUSTRAC crypto warning mean for the entire industry? What prompted the financial watchdog? What does it mean for you? Let’s find out!
Understanding The AUSTRAC Crypto Warning
“The blitz is aimed at limiting harm to our community, making it harder for criminals to launder their money and improving the integrity and accuracy of our register, so we’re urging businesses to ‘use it or lose it’.”
- Brendan Thomas, AUSTRAC CEO
What AUSTRAC is saying is that inactive DCEs registered in Australia must now start complying with their obligations and fulfil legal requirements. If they can not do that, they must come forward and voluntarily deregister themselves. Failure to do so will lead to the DCEs’ registration being terminated.
For those who don’t know, AUSTRAC, along with being the financial watchdog down under, also serves as Australia’s regulator for anti-money laundering and counter-terrorism financing (AML/CTF). The recent AUSTRAC crypto warning is part of their ongoing efforts to ensure that inactive DCEs are not being used for criminal activities.
In Australia, registered DCEs have significant AML/CTF obligations that they must fulfill. These obligations include:
- Identifying and verifying their customers.
- Monitoring transactions.
- Reporting suspicions to AUSTRAC.
In cases where a DCE is registered but inactive, its ability to adhere to these compliance standards comes into question. As of now, the regulatory body has not accused any DCEs of misconduct, but is using the AUSTRAC crypto warning as a regulatory push for identifying and dealing with non-operational businesses that still hold registration.
The AUSTRAC crypto warning aligns with the fact that inactive and registered DCEs can be used for criminal activities or create confusion. Some of the key reasons for explicitly targeting inactive DCEs include:
- Limiting Misuse – Registered and inactive DCEs may not go through sufficient verification protocols when reactivated, and this lack of scrutiny allows criminals to gain access to a regulated environment in which they can execute their malicious initiatives.
- Decluttering The Registry – Having numerous registered DCEs that are currently inactive only adds noise to AUSTRAC’s monitoring and verification protocols, resulting in limited effectiveness.
- Adhering To Global Standards – Various international financial bodies such as the Financial Action Task Force (FATF) require nations to have in-depth oversight of virtual asset service providers and having such oversight mandate accurate registries.
- Ensuring Customer Protection – While inactive DCEs do not interact with crypto users, being registered gives them false legitimacy and credibility, which can be used as assets in a scam.
While the AUSTRAC crypto warning might seem like a crackdown on DCEs that are inactive, it is, indeed, a proactive move that can make the crypto environment safe for Australian users.
Does Australia Need The AUSTRAC Crypto Warning?
The short answer is “Yes!” Here’s why…
DCEs in Australia are obligated to fulfil various compliance measures to maintain their regulatory legitimacy. However, many in the crypto industry and the government believe that the current regulatory protocols for crypto are insufficient. In addition, they acknowledge the need for providing clearer rules and better customer protection.
The government is making efforts geared towards the development of a more comprehensive regulatory framework for digital assets. Meanwhile, the AUSTRAC crypto warning can be seen as a prime example of using existing capabilities to maximize the sector’s integrity. Having a comprehensive framework leads to various benefits that include:
- Lower criminal activity.
- More customer confidence.
- Ability to develop feasible plans for future growth.
- A fair and competitive environment among DCEs.
However, developing such a regulatory framework does come with a set of unique challenges. Initially, the regulatory body would have to conclusively define what “inactive” means. After that, identifying and allocating the right resources for the development and implementation of the framework will also be a hurdle.
Apart from that, the fact that strict policies can discourage smaller players and that regulations tend to have a hard time keeping up with technology are two other key issues that will need to be addressed.
What Should DCEs And Users Do?
The AUSTRAC crypto warning can have different meanings for you depending on your role. Understanding what the warning entails for you based on your unique circumstances is essential, as it can help ensure compliance. As a DCE, you should review your current status and, if you wish to reactivate the DCE, ensure compliance.
DCEs that don’t want to continue their operations can voluntarily apply for a cancellation of their registration. In either case, you shouldn’t ignore the warning because having a government body take action against you can cause hurdles for future regulatory interactions. As a customer or user, you should:
- Always ensure that the exchanges you use are registered with AUSTRAC.
- Stat updated with all the regulatory developments regarding the crypto industry.
- Be cautious and identify any malicious behavior, such as any exchange that was inactive for quite a while, and is now active again.
While the crypto industry waits for more comprehensive frameworks, actions from both providers and users that lead to current regulatory compliance can help create a safer crypto environment for all.
Frequently Asked Questions (FAQs)
Is Binance registered with AUSTRAC?
Yes, Binance is registered with AUSTRAC, making the platform legal to use in Australia.
What transactions must be reported to AUSTRAC?
Any transactions that meet or exceed $10,000 must be reported to AUSTRAC.
What is the AUSTRAC 100-point check?
This is a personal identification system that can help limit or eliminate financial transaction fraud done by companies or individuals.
