Through the unveiling of its “Regulating digital asset platforms” consultation paper, the Australian Treasury has indicated its intent to regulate service providers and exchanges. In particular, regulating service providers and exchanges as opposed to individual coins or cryptocurrencies themselves is, in the Treasury’s view, said to (1) address consumer harms and (2) support innovation in the digital asset sector—two goals that have been difficult for regulators to successfully achieve together.

Specifically, the Treasury proposes the requirement for cryptocurrency exchanges to hold a financial services license issued by the local financial regulator, the Australian Securities and Investment Commission (ASIC). Importantly, preexisting financial services laws (that are general, all-encompassing rather than crypto-specific in nature) will apply; there will be no creation of new laws to regulate the exchanges and service providers.

As a general principle, it is helpful to recognize that what the Treasury suggests is, in fact, just a suggestion. The Government is not bound to follow its recommendations, and lobbying will follow once the paper is released. And, the report has already faced opposition from those hesitant about the regulatory framework’s ability to encompass future innovations in crypto that might fall outside the traditional “financial services” box. This concern in and of itself is anything but atypical in the great task of how to best regulate crypto. In addition, it does not address the central issue of de-banking, and many licensed digital assets exchanges are struggling to find adequate banking arrangements both at the domestic and international levels.

It will be interesting to follow the lobbying efforts as much of crypto in Australia will hinge on this.

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Photo credits: See https://www.investinblockchain.com/australian-crypto-scams-reports-up-by-200-2018/.