Crypto regulation looms to prevent another FTX

afr.com:

Cryptocurrency exchanges including BTC Markets, Kraken, Swyftx and Coinbase are keen on Australia introducing regulation for the controversial crypto space, to protect investors and help rebuild trust in an industry badly damaged by FTX’s implosion last year.

After a long delay following last year’s change in federal government, the government will release a Treasury consultation paper in the coming weeks that will detail the plan, including creating rules for crypto custody and licensing for exchanges.

Treasury is preparing a plan to regulate crypto exchanges including subjecting them to licensing and custody rules after the collapse of Sam Bankman-Fried’s FTX platform. AP

The aim is to protect consumers from another FTX-style scandal – revelations of widespread fraud resulted in mass losses and triggered the exchange’s bankruptcy – while creating legal foundations that also allow crypto to grow.

Crypto exchanges want regulation because it will help legitimise the sector. This could entail standards around cybersecurity and customer protection, to help prevent scams and frauds, and making sure laws around anti-money laundering are met. (The exchanges are regulated by AUSTRAC but under a relatively light touch that does not hold them to the same duties as ASIC-regulated markets that deal in financial products.)

The Australian Financial Review revealed last November that the federal government wanted to regulate the area following the FTX debacle, after it hit the pause button on the Morrison government’s plans. These were being led by Liberal Senator Andrew Bragg, who introduced a private member’s bill late last year from opposition, to keep the pressure on Treasury. The Senate legislation committee, on which Senator