Australian government promises to lead the way on crypto custody and licensing
The Australian government has provided it's response to the events of the recent week and has promised to make Australia a leader in regulating crypto custody by bringing forward plans to provide crypto custody and centralised exchange licensing. The last media release from the Assistant Treasurer, The Hon Stephen Jones promised that the government would improve the way Australia manages risk around crypto assets and recognised that regulation was struggling to keep up with the pace and adoption of crypto-assets.
Senator Andrew Bragg, writing in an opinion piece in the Australian Financial Review, said:
FTX did not have an Australian cryptocurrency licence, because no such licensing regime exists. Its Australian licences did not relate to cryptocurrency. And the allegations of fraud are comparable to those in any other industry.
Senator Bragg rightly points out that the best way to protect consumers is to establish regulated markets, being businesses where the risk of undetected wrongdoing can have very significant consequences. This should not be a political or partisan principle, and last year's Senate Select Committee and Final Report was a bipartisan consultation.
A spokesman for Treasurer Jim Chalmers said to the AFR that draft regulation would be introduced into the Australian parliament next year and that:
We are closely monitoring the fallout from the FTX collapse, including further volatility in crypto asset markets and any spillovers into financial markets more broadly
Leading exchange BTC Markets said:
The focus for regulators should be on governing human behaviour rather than the underlying technology. Assets such as Bitcoin and Ethereum should not be part of the discussion, instead it's the actions of the management team that resulted in the use of client funds requires scrutiny
A draft bill has been proposed by Senator Bragg and he has taken private submissions and met with industry to gain feedback. That private member's bill represents a good starting point (and will not become law) but a great deal more work is needed, and urgently, to bring together comprehensive and technology-enabling legislation.
Regulation and legislation takes time to develop and ensure fitness for purpose, otherwise unexpected outcomes will occur and businesses will be pushed offshore, creating the very risks which are of concern presently.