Australia took a step toward regulating its crypto industry by issuing a consultation paper outlining its plans.
The Australian government has rejected an “exhaustive, bespoke taxonomy” for cryptocurrency. Instead, it chose a structure that divides cryptocurrency into two categories: intermediaries or service providers on the one hand, and public networks or smart contracts on the other. Officials want to know if existing financial restrictions will suffice in these sectors.
The Office of the Treasurer of Australia, following in the footsteps of the UK Treasury, which launched a crypto consultation on Thursday morning, is seeking feedback from stakeholders from now until March 3.
Officials want to know if cryptocurrency should be regulated independently or under existing financial legislation, how to protect investors, and what role smart contracts should play.
According to the consultation, “functionally-equivalent products should be treated equivalently.” citing a 1997 financial systems inquiry. The similar approach can be traced back to the Financial Stability Board’s prescription of “same activity, same risk, same regulation” in the global watchdog’s recommended framework for crypto regulation, which was released in October.
Following the catastrophic collapse of crypto behemoth FTX, the Australian government delivered on a commitment made in December to draft proposals for licensing and regulating crypto service providers.
After that the officials intend to publish a consultation proposal for a licensing and custody framework for crypto asset service providers in mid-2023, noting that the “logical next step” is to implement a licensing regime with minimum standards for crypto asset service providers, including secure custody.
The Albanese administration in a separate announcement released alongside the consultation paper that it intends to increase the size of the Australian Securities and Investments Commission’s crypto enforcement team. ASIC is a regulatory agency that monitors crypto service providers via its licensing framework.
The Treasury is also looking into “unsustainable business models used by some companies dealing in crypto assets (that) have left consumers exposed,” as well as establishing requirements for crypto firms to “ensure they adequately safe-keep assets for customers.”
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