Crypto exchanges to be regulated under bolstered licence regime

afr.com:

The federal government will require crypto exchanges to hold a financial services licence, issued by the corporate regulator, under a new regime bolstered with specific obligations to reduce risks for investors while also supporting the growth of the digital asset sector.

Assistant Treasurer Stephen Jones will announce the government’s long-anticipated regulatory regime at The Australian Financial Review Crypto Summit on Monday morning, where he will say that regulation will protect users by reducing the risk of scams and of exchanges collapsing.

Assistant Treasurer Stephen Jones will announce a regulation plan for crypto exchanges at the AFR Crypto Summit on Monday morning. Janie Barrett

The government has decided to regulate at the level of the crypto exchanges, rather than specific “tokens”, and will do so under existing financial services laws rather that creating a bespoke regime.

Exchanges holding more than $5 million in aggregate, or more than $1500 for any individual, will have to obtain an Australian Financial Services Licence (AFSL), which are granted by the Australian Securities and Investments Commission.

This will require the exchanges to provide services honestly and fairly, manage conflicts of interest, make disclosures, submit financial accounts and meet solvency and cash reserve requirements. Rules around asset custody will also be included.

The guidelines for exchanges – which hold billions of dollars in crypto, held by one in four Australians, according to Treasury – will lift consumer protections in a sector that has internationally been plagued by hacks and poor risk management. This was exemplified by the collapse of US crypto exchange FTX, which triggered losses for around 30,000 Australians.

Regul