Updated Crypto Regulations In Australia: Pledged To Take Action On Debanking 

Under the leadership of Prime Minister Anthony Albanese, the Australian government has outlined a new regulatory framework focused on digital assets. While addressing the risks associated with consumer protection and market integrity, the new framework also aims to provide better certainty for community participants. After implementing the new regulations, all the major crypto platforms are required to obtain an Australian Financial Services License. The government has exempted small-scale firms and businesses involved in financial services. 

The statement of the Treasury on Developing Innovative Australian Digital Asset Industry released the derailed plans for the regulation of the Digital Asset Platrfroms on Thursday. The payments of stablecoins under the current financial service law have also been released. The Treasury Department expressed that they are following a similar approach in the European Union and Singapore. Aligning with international practices can enable Australia to better global competitiveness in the digital sector. 

EU and Singapore have adopted significant steps to regulate crypto assets. EU has introduced MiCA as the bespoke regime and Singapore has extended the current Payment Services Act to introduce the crypto service providers within the licensing and compliance framework. For teh security tokens EU has applied for existing financial regulations like MiFID II before MiCA and AMLD5 for the crypto exchanges. This phase is similar to the strategy of Australia.

Key Inclusions Within The Regulatory Scope

The currently proposed framework will be applicable for custody services, crypto exchanges, and specific brokerage platforms. This will also facilitate the storage and trading of digital assets. Stablecoins issuers and businesses that offer tokenized stored-value facilities will be subjected to licensing and compliance obligations. However, the firms that create or use digital assets for the development of software, non-financial purposes, or the maintenance of digital asset infrastructure will not abide by the latest regulations. 

Tackling Debanking: Government Regulations

The government has also acknowledged debanking. Financial institutions restrict their services to crypto firms and this has become a growing issue. The latest licensing aims to improve the transparency and risk management within the sector. The bold step could reduce the instances of debanking by major institutions. To ensure transparency and fairness, the Government has been working with stakeholders. This includes the engagement with major banks in Australia to understand the significance of debanking. 

Jonathon Miller, managing director of Kraken in Australia has emphasis the importance of bespoke legislation as a way to reduce uncertainty. He expressed the need for bespoke legislation to address the current uncertainty and confusion of Australian crypto businesses and investors. A clear regulatory framework can remove all the barriers that hold the growth of the Australian economy. The government is currently planning to release a draft legislation for public consultation this year. The Australian Securities and Investments Commission is also planning to redefine the guidance on digital assets. 

The digital asset platforms and payment service providers will leverage the new regulatory framework provided by the Australian Financial Services Licenses (AFSL). This indicates that the business will have an impact from the latest framework. The exception will be made for certain stablecoins and wrapped tokens, as they won’t require holding the financial market license. The new DAP treasury has clarified that the primary intention is to mitigate risks associated with the custody arrangements.

This won’t be applicable for crypto businesses that are not involved in the custody. Certain activities are not covered in the regime. This includes creating non-financial product digital assets, developing the software that has been used by others to create or engage with the digital assets, and contributing to the maintenance of several types of digital asset infrastructure.

The government has clarified that small businesses and start-ups within a certain size are not required to be subjected to full obligations and that they might be subjected to tailored compliance requirements. The government has also acknowledged the trend of “debanking” among financial institutions. They have stated that the latest licensing mechanism is anticipated to improve transparency and risk management. The latest regulations could have significant implications for small businesses as well, especially for their compliance and operational