- The Australian government has issued a consultation paper in which it proposes to use some existing financial frameworks to regulate its crypto sector.
- Australia’s financial regulator may receive additional resources to oversee cryptocurrency.
- Australia took a step toward regulating its crypto sector by issuing a consultation paper outlining its plans.
The Australian government has rejected an “exhaustive, bespoke taxonomy” for cryptocurrency. Instead, it chose a framework 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 regulations will suffice in these categories.
The Australian Treasury, following in the footsteps of the UK Treasury, which published a crypto consultation on Thursday morning, is seeking feedback from stakeholders from now until March 3.
Officials want to know whether cryptocurrency should be regulated separately or within existing financial rules, how to protect investors, and what role smart contracts should play.
Same functions, same rules
According to the consultation, “functionally equivalent products should be treated equally,” citing a 1997 financial systems inquiry. The same approach can be traced back to the Financial Stability Board’s prescription of “same activity, same risk, same regulation” in the global watchdog’s proposed framework for crypto regulation, which was published in October.
Following the dramatic collapse of crypto giant FTX, the Australian government delivered on a promise made in December to produce plans for licensing and regulating crypto service providers.
Following that, officials intend to publish a consultation proposal for a licencing and custody framework for crypto asset service providers in mid-2023, noting that the “logical next step” is to implement a licencing regime with minimum standards for crypto asset service providers, including secure custody.
Boosting the regulator
The Albanese government said 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 body that monitors crypto service providers via its licencing regime.
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.”