The Australian government has recently announced a proposal that aims to impose tighter regulations on cryptocurrency trading platforms. The main focus of these regulations is to enhance oversight of customer funds. According to a report by the Wall Street Journal, the proposal suggests subjecting digital asset platforms to the same laws that govern other financial services providers.
As part of the plan, operators of crypto platforms will be required to obtain a financial services license. Additionally, they will be subject to continuous monitoring and routine audits of customer funds. Australian Treasurer Jim Chalmers stated in a release, “Government is acting methodically to ensure that consumers are adequately protected and innovation can flourish.” He also highlighted that the proposed regulations align with similar measures implemented in other jurisdictions.
Concerns regarding the need for tighter oversight
The recent collapse of some high-profile crypto firms has highlighted the necessity for stricter oversight in the industry. One such example is the collapse of crypto exchange FTX in November 2022. At the time of its downfall, FTX held a significant amount of money, 218.6 million Australian dollars (US$137.7 million), belonging to 24,656 local customers. This incident emphasized the vulnerabilities within the system.
Interestingly, FTX had previously held an Australian Financial Services license, which was eventually suspended by regulators. The founder of FTX, Sam Bankman-Fried, is currently facing trial in the United States. Prosecutors allege that he orchestrated the theft of billions of dollars from customers for personal enrichment, venture investments, and political campaign contributions. Bankman-Fried has pleaded not guilty to all charges.
Increased scrutiny and actions taken in Australia
There has been a growing level of scrutiny in Australia towards the crypto industry. In May, cryptocurrency exchange Binance Australia notified its customers that they would lose access to Australian dollar deposits and withdrawals due to a decision by its third-party service provider. In July, officials from the Australian Securities and Investments Commission (ASIC) even conducted searches at Binance Australia’s offices.
In addition to these events, Australia’s prudential regulator instructed banks to report their exposures to crypto firms and startups following the collapse of the Silicon Valley Bank. The Australian Prudential Regulation Authority (APRA) asked local banks to improve their reporting on crypto assets and provide daily updates to gain more insight into potential vulnerabilities in the system.
Blockchain Australia, an industry body representing the Blockchain and digital currency industry in Australia, has responded to these increasing restrictions on crypto payments. They have launched new initiatives to tackle the issue of crypto scams and frauds. These initiatives include education programs, roundtables, and more.
