In the wake of the drawn out cryptocurrency market downturn, increased regulation of the sector seems inevitable. With nearly one million Australians transacting in cryptocurrencies last year, there have been widespread calls to enact additional protections for retail investors.
This table outlines key regulatory developments from Australian financial regulators on possible treatment of crypto-assets.
Regulator
Current Work
Timeline
Treasury
Considering the introduction of new licensing and custody requirements for businesses providing services related to crypto-assets (such as exchanges and other intermediaries).
Public consultations recently concluded. Any reforms are likely to include a substantial transition period for existing operators
ACCC
Establishing mechanisms that allow ACCC to take action under Australian Consumer Law to protect consumers.
Ongoing
APRA
Preparing an internationally aligned prudential framework on crypto-assets and related activities.
Effective by 2025
ASIC
Continues to apply the current regulatory regime, awaiting any developments from Treasury.
See above
RBA
Reviewing the introduction of a Central Bank Digital Currency.
Ongoing
The key priorities for regulators appear to be the protection of consumers, maintenance of a fair and efficient financial system (including in respect of crypto-assets), and the promotion of innovation and foreign investment in Australia. Accordingly, the Financial Services Minister, Stephen Jones, has recently suggested that the new government will be reviewing crypto regulation as part of the larger digital payments system overhaul.
The key challenges for regulators will be delivering on these contrasting and somewhat competing objectives. The existing framework for financial markets is unlikely to translate well into crypto exchanges. A more tailored approach will be necessary in order to deliver on both the consumer protection and competition aims.
The Council of Financial Regulators has also explicitly advised banks against de-banking the crypto space and recognised the importance of a robust regulatory framework for this market. Further, in its first interim report on financial services legislation reform, the Australian Law Reform Commission briefly recognised cryptocurrencies as a new market in Australia.
With more Australians exposed to this volatile sector than ever before, there is no doubt that crypto-assets are now part of the mainstream financial system (and perhaps less uncorrelated as was once thought), and many organisations see benefits in applying more traditional regulatory supervision to this asset class.
The last few months of crypto volatility has been instructive – showing that market risks are real and cannot be ignored.
About this Author
Mr. Knight is a commercial and regulatory lawyer with a focus on the financial services industry. He advises a range of wholesale and retail fund managers, banks, financial advisers, superannuation fund trustees and other financial services firms.
Mr. Knight concentrates on commercial transactions in the industry and on advising clients about Australian licensing, disclosure, and compliance obligations. He regularly advises international fund managers about offering their products in Australia.
Mr. Knight also has…
Kithmin Ranamukhaarachchi is a Melbourne based lawyer at K&L Gates in the Asset Management and Investment Funds (AMIF) team. He has experience assisting fintechs and superannuation funds on regulatory and compliance matters, including advising on Consumer Data Right (Open Banking).
Kithmin joined K&L Gates in 2021 and rotated through the AMIF, Finance and Health Care and FDA teams during his graduate year.
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