In mid-August 2017 the Australian Federal Parliament moved to amend the succinctly named Anti-Money Laundering and Counter Terrorism Financing Act 2006 (The Act) via the equally briefly named Anti-Money Laundering and Counter Terrorism Financing Amendment Bill 2017 (The Bill).
A statutory definition of digital currency
The Bill sets out a definition of digital currency as follows:
digital currency means:
(a) a digital representation of value that:
(i) functions as a medium of exchange, a store of economic value, or a unit of account; and
(ii) is not issued by or under the authority of a government body; and
(iii) is interchangeable with money (including through the crediting of an account) and may be used as consideration for the supply of goods or services; and
(iv) is generally available to members of the public without any restriction on its use as consideration; or
(b) a means of exchange or digital process or crediting declared to be digital currency by the AML/CTF Rules; but does not include any right or thing that, under the AML/CTF Rules, is taken not to be digital currency for the purposes of this Act.
The definition is not limited to cryptocurrencies but applies to any kind of digital currency.
While it is useful to have an updated definition of digital currency in Australian law, for the purposes of adoption into other legislation, the impact of the other parts of the Amending Act are likely to be less well received by the cryptocurrency community.
The Digital Currency Exchange Register
The largest imposition is the establishment of the Digital Currency Exchange Register (Register) and a requirement that anyone operating a “registrable digital exchange” must be registered with AUSTRAC and included on the Register. One day the Australian government will come up with some better acronyms for this sort of thing.
What is a registrable digital exchange?
A registrable digital exchange service is one that is not specifically exempted under the Rules and is providing the following service to a customer:
[E]xchanging digital currency for money (whether Australian or not) or exchanging money (whether Australian or not) for digital currency, where the exchange is provided in the course of carrying on a digital currency exchange business.
Based on this definition, a business which accepts cryptocurrencies as payments for goods and services and is not operating an exchange should be exempt from registration.
Fines for a failure to register starts at 2 years imprisonment and/or a fine of $105,000 for the first offence and ramping up to 7 yearsand/or a fine of $420,000 for repeat offences. Critically, strict liability applies to the registration, which places a significant onus on anyone falling within the obligation to register. A strict liability is one which is made out as soon as the conditions of the offence are proven, and there are very limited defences to such charges.
Registering a business
In order to be included on the Register, a cryptocurrency exchange:
Needs to register with AUSTRAC, which has an online guide and registration form to assist in the process; and
Must ensure that their business operations comply with the AML/CTF Rules including by identifying customers, maintaining an AML/CTF program that is compliant with the Act and Rules, reporting suspicious matters and maintaining records for 7 years.
The compliance doesn’t come for free, but the move to regulate the area by expanding the existing rules at least indicates a willingness of the Australian government to move to legitimise cryptocurrencies and recognise their widespread use.
However, given that the majority of Australian coin exchanges and agents are likely not policing their transactions or monitoring suspicious behaviour at the same level as banks do (or are supposed to do), this may impose significant looming costs on running a cryptocurrency businesses, just when the “innovation” Prime Minister should be helping to lower the costs of doing business.
Disclaimer: The author holds cryptocurrencies and none of the above should be construed as legal advice.