Australia Aims to Regulate Crypto Start-ups with Mandatory Financial Services Licences

Crypto Reporter

Shalini Nagarajan

Crypto Reporter

Shalini Nagarajan

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Shalini is a crypto reporter who provides in-depth reports on daily developments and regulatory shifts in the cryptocurrency sector.

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Last updated:

September 23, 2024 01:59 EDT

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Australia is set to introduce new regulations requiring the crypto industry to obtain financial services licenses under the Corporations Act.

On Monday, Australian Securities and Investments Commission commissioner Alan Kirkland said at an AFR Digital Assets Summit that many crypto-asset firms in Australia will need to be licensed. He stated that ASIC considers several crypto assets as financial products under existing laws.

ASIC’s regulatory framework focuses on “financial products,” which involve financial investments, risk management, or non-cash transactions. However, certain aspects of crypto don’t entirely align with this model. This creates uncertainty about whether specific crypto structures require licensing.

Kirkland confirmed to Cryptonews that ASIC will release new draft guidance soon, and plans to invite industry feedback on these updates.

“Millions of Australians now hold crypto-asset investments and ASIC wants to make sure they have access to important consumer protections provided by the current regulatory regime” he said.

Crypto Developers Bypass Licensing, Australia to Clarify Token Rules Amid Regulatory Concerns

Many crypto developers have not obtained Australian Financial Services Licenses (AFSLs), following legal advice. This decision is based on the belief that their investment products don’t fall under the purview of current laws, AFR reported.

To address that, ASIC plans to update guidance by November. This will clarify the classification and treatment of specific crypto tokens representing digital ownership rights and related products.

Further, Kirkland noted ASIC’s concern over potential consumer harm and market misconduct. He stated that licensing will help reduce risks, build consumer trust and protect market integrity.

ASIC Tightens Crypto Oversight

ASIC has intensified its enforcement efforts, signaling a heightened scrutiny over the crypto sector. The agency recently claimed that Kraken did not properly educate its Australian clients on the risks of margin trading, resulting in considerable financial losses for customers.

Further, in August, ASIC initiated legal action against ASX, accusing the market operator of mismanaging the blockchain-based CHESS replacement project.