The federal government has put forward plans to more closely regulate cryptocurrency trading, announcing plans for a licensing regime and custody arrangements.
The government’s plans, announced by Superannuation, Financial Services and the Digital Economy Minister Jane Hume during a speech in Sydney today as part of Blockchain Week, are contained in a policy paper released today for consultation.
“As discussed in the policy paper that we are releasing this afternoon, the government intends to establish a market licensing regime for crypto exchanges,” Hume said.
“The Morrison government wants to make sure that consumers can trust the exchanges they use to buy crypto.
“The government will not be protecting consumers from market volatility, but Australian investors will be sure that if they use a licensed Australian exchange, they can trust that exchange to deliver on its commitments to its customers and have appropriate protections.”
She added the government also planned to introduce custody arrangements for cryptocurrency exchanges so investors who held their crypto on an exchange could always access their money.
“These two changes will make it better, safer and more secure for Australian consumers to invest in crypto. Importantly, they will also send a signal to the industry – to the world – that Australia is a country that embraces innovation,” she noted.
The proposal paper, “Crypto asset secondary service providers (CASSPrs): Licensing and custody requirements”, said the licensing regime for CASSPrs would mandate minimum standards of conduct for business operations and for dealing with retail consumers, support the anti-money laundering/counter-terrorism funding regime, protect the community from the harm arising from criminals and their associates owning or controlling CASSPrs, and provide a signal to consumers as to which CASSPrs were high-quality, operationally sound businesses.
The proposed licensing regime will apply to all secondary service providers that operate as brokers, dealers or operate a market for crypto assets and all secondary service providers that offer custodial services in relation to crypto assets, and would be separate from the Australian financial services licensing regime.
The paper stated the custody arrangement would implement mandatory minimum, principles-based custody obligations for private keys that are held or stored by CASSPrs on behalf of consumers and any CASSPr that has a direct relationship with a consumer would be liable for the safekeeping of all crypto asset private keys in its care.
Feedback on the paper, which is available from the Treasury website, closes on 27 May.
