The long awaited Report into Australia as a Financial and Technology Centre provides supportive policy towards a range of digital asset matters. In a series of notes we will unpack the recommendations from the report, first first of which relates to licensing of Digital Currency Exchanges (DCEs):
The committee recommends that the Australian Government establish a market licensing regime for Digital Currency Exchanges, including capital adequacy, auditing and responsible person tests under the Treasury portfolio.
DCEs currently operate without a specific regulatory framework beyond an obligation to comply with registration requirements with AUSTRAC, Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) requirements and the very consumer centric Australian Consumer Law as well as other laws applying to all businesses. Numerous submissions to the committee submitted the AUSTRAC registration process was a low bar, with universal standard applying to DCEs.
The committee felt that digital currency exchanges holdings billions of dollars worth of their customers assets should be subject to auditing obligations, capital adequacy obligations and a more rigorous verification process.
Those involved in the digital asset space are calling for regulation to instill greater consumer confidence in the industry to promote growth. The report notes concerns about scams and Recommendation 1 presumes a licensing regime will demonstrate that comprehensive consumer protections are in place.
The final shape of the licensing requirements for DCEs will help show whether this presumption will meet the difficult balance of "light touch" regulation and consumer protection to help promote the growing Australian digital asset exchange space.