The Australian government is proposing licensing cryptocurrency trading platforms, along with tighter oversight of customers’ funds. A proposal released today (Monday) detailed that Aussie crypto exchanges would need to obtain a license from the local financial services regulator.

New Crypto Rules in Australia

Still, at a consultation stage, the Aussie government seeks feedback on its proposal until 1 December 2023. Consultation on the draft bill will continue next year.

The “government is acting methodically to ensure that consumers are adequately protected, and innovation can flourish,” Australian Treasurer Jim Chalmers said in a statement, adding that the rules align with other jurisdictions.

The proposed changes will apply to exchanges holding more than US$ 3.2 million (AU$ 5 million) or more than US$ 946 (AU$ 1,500) per individual, mandating them to obtain a license from the Australian Securities and Investment Commission (ASIC).

The regulator will also review the minimum standards of digital assets like tokens.

🚨 #Crypto exchanges in Australia 🇦🇺 will soon be required to hold a financial-services license.

Digital-asset platforms that hold more than A$5 million ($3.2 million), or A$1,500 for an individual, must get a permit from the Australian Securities and Investments Commission or… pic.twitter.com/W59VtmDxjs

— Ajay Kashyap (@EverythingAjay) October 16, 2023

“Collapses of digital asset platforms, both locally and globally, have seen Australians lose their assets or be forced to wait their turn amongst long lines of creditors,” the proposal paper stated. “These reforms seek to reduce the risk of these collapses happening, by lifting the standard of their operations and increasing their oversight.”

Although the proposal paper did not mention any platforms, now-collapsed FTX operates in the country with a local subsidiary. The local regulator also found lapses in the crypto derivatives offering of Binance, leading to the shuttering of those services by the exchange.

Support and Criticisms

Meanwhile, the local crypto industry looks divided on Australia’s decision to mandate licensing of exchanges.

Adam Percy, the General Manager of the local crypto exchange Swyftx, called the proposed rules “thoughtful,” adding that “the primary focus should be to make sure cryptocurrency users can access blockchain technology with appropriate protections and that there’s room for innovation.”

However, Kraken’s Director of Kraken Australia, Jonathon Miller, thinks otherwise and said: “Australia is now in the unfortunate situation where our regulation has taken a very long time, so we’re taking the approach of shoehorning crypto into existing financial services regulation.”

Last month, ASIC sued the Aussie subsidiary of Kraken for violating the design and distribution obligations for the margin trading product, seeking a civil penalty.