The Australian Authorities, by way of the Treasury, has introduced that it’s working to introduce a regulatory framework for entities offering entry to digital belongings and holding them for Australians and Australian companies – which is able to embody required licensing of all digital asset intermediaries.
The reforms goal recognized client harms, whereas supporting innovation within the makes use of of digital belongings and rising applied sciences. The implementation of the proposed framework is topic to future legislative design and improvement.
The proposed regulatory framework would apply to digital asset service suppliers that current comparable dangers to entities that function within the conventional monetary system. It seeks to leverage the Australian Monetary Providers Licence (AFSL) framework to control digital asset service suppliers to make sure constant oversight and safeguards for shoppers.
The Treasury has issued a Session Paper entitled Regulating digital asset platforms, open for remark and submissions till December 1.
This paper has seven elements:
- Introduction – explains the targets of the reforms and the coverage downside being solved.
- Regulating digital asset intermediaries – outlines a proposed regulatory framework for digital asset amenities, together with its scope, construction, and focus.
- Licensing digital asset intermediaries – describes a mixture of commonplace and tailor-made licensing obligations that may apply to service suppliers in relation to digital asset amenities.
- Minimal requirements for facility contract – describes the proposed necessities for structuring a digital asset facility, together with custodial and reporting guidelines.
- Minimal requirements for ‘financialised features’ – describes the precise actions that may require compliance with further guidelines.
- Different actions – explores some actions that could be included sooner or later.
- Subsequent steps – outlines future milestones in relation to this proposal.
The regulatory framework proposed on this paper doesn’t intend to deal with anti‑cash laundering and counter‑terrorism financing (AML/CTF) necessities. Companies offering digital forex alternate companies, as set out within the AML/CTF Act will proceed to be required to register with AUSTRAC. A separate session being led by the Lawyer‑Normal’s Division is at present contemplating increasing the vary of digital asset associated companies which are topic to AML/CTF regulation in keeping with world Monetary Motion Process Pressure Requirements, together with the requirement for companies offering such companies to register with AUSTRAC.
The Treasury notes that client harms related to digital belongings have centered across the vulnerabilities of intermediaries. The enterprise mannequin shared by the intermediaries liable for these harms is a ‘multi‑operate platform that holds belongings for purchasers’ (digital asset platform). Intermediaries within the digital asset ecosystem are virtually universally structured as digital asset platforms. This contains all of the dominant gamers within the digital belongings market, each within the quantity of transactions they course of and the dimensions of the client base they serve. It additionally seems to incorporate most ‘brokers’ and even intermediaries holding non‑digital belongings as a part of an ‘asset‑backed token’ association.
Current failures of digital asset platforms have led to appreciable client losses. As an example, the collapse of FTX alone affected roughly 50,000 Australian shoppers. The widespread components amongst these failures had been: (i) vital lack of belongings held on behalf of shoppers; (ii) ineffective administration practices; (iii) insufficient governance constructions; (iv) poor operational resilience; (v) cases of fraudulent actions; and (vi) widespread conflicts of curiosity.
General, the targets of the proposed framework embody:
- defending shoppers;
- selling innovation via expertise neutrality and regulatory readability;
- aligning Australia’s digital asset regulatory framework with worldwide jurisdictions, the place acceptable; and
- utilising regulatory instruments that present agility, flexibility, and flexibility.
