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Australia will require cryptocurrency exchanges to obtain Australian financial services licenses (AFSL) under new federal legislation, marking a significant regulatory shift for the digital asset sector.
The move affects approximately 400 crypto exchanges currently registered with the Australian Transaction Reports and Analysis Centre, though many platforms are believed to be dormant, according to a report in AFR today. Under existing rules, these exchanges only need anti-money laundering and know-your-customer policies.
Assistant Treasurer Daniel Mulino announced the regulatory changes at the Digital Economy Council of Australia's global digital assets summit, stating the government aims to support sector growth while reducing investor risks. The Australian Securities and Investments Commission will issue the new licenses.
"It is about legitimising the good actors and shutting out the bad, giving businesses certainty and consumers confidence," Mulino said, according to the Australian Financial Review.
Licensed exchanges must operate efficiently, honestly and fairly, with potential penalties for misleading conduct and unfair contract terms. The regulation targets exchange platforms rather than individual cryptocurrencies or tokens.
Major domestic exchanges including BTC Markets and Independent Reserve have endorsed the regulatory framework. Smaller platforms handling under $5,000 per customer and less than $10 million in annual transactions will be exempt from licensing requirements.
The legislation will amend the Corporations Act to establish definitions for "digital asset platform" and "tokenised custody platform." Tokens functioning as financial products will fall under existing regulatory frameworks, with ASIC preparing guidance on which tokens require AFSLs by November.
Notably absent from the new rules are additional requirements for digital asset creators or businesses using digital assets for non-financial purposes. Gaming tokens and non-fungible tokens (NFTs) used for artistic purposes will remain unregulate, the report said.
Australia is separately developing broader payments licensing legislation addressing digital assets including stablecoins - cryptocurrencies pegged to traditional currencies like the US dollar. ASIC recently licensed two Australian dollar stablecoins, AUDM and AUDF, with Coinbase announcing plans to list a third, AUDD.
