Australia Looks to Implement New Licensing Rules for Crypto Exchanges

Key Takeaways

• The proposed licensing framework will require crypto firms to comply with standards similar to those governing traditional financial services providers
• As per ASIC Commissioner Alan Kirkland, the regulation will enhance market integrity and reduce risks of fraud and misconduct.

Australian regulators are preparing new legislation that will require cryptocurrency exchanges to obtain financial services licenses. The move comes as part of a broader effort by the Australian Securities and Investments Commission (ASIC) to align the growing crypto sector with existing financial regulations.

Speaking at the AFR Crypto and Digital Assets Summit in Sydney on September 23, ASIC Commissioner Alan Kirkland outlined the regulator’s plans. Kirkland noted that many widely traded crypto assets, such as Bitcoin and Ether, already meet the legal definition of financial products under Australia’s Corporations Act. “We believe many crypto assets are financial products,” Kirkland said. He explained that under this interpretation, crypto firms would need to obtain licenses to operate legally in Australia.

The proposed licensing framework will require crypto firms to comply with standards similar to those governing traditional financial services providers. This includes applying for financial services licenses, a measure that ASIC believes will help clarify regulatory obligations for companies operating in the sector. According to Kirkland, this will enhance market integrity and consumer protection, while reducing risks of fraud and misconduct.

The new licensing regime is expected to be implemented by November 2024. ASIC is also working to update its existing regulatory guidance to ensure it reflects the changing landscape of digital assets. The forthcoming changes are aimed at providing greater regulatory clarity for companies and investors alike, while fostering a safer and more transparent crypto market in Australia.

The latest development comes a month after ASIC won its court case against Bit Trade, the operator of Kraken in Australia, for failing to comply with design and distribution obligations. On August 23, the Federal Court of Australia ruled against Bit Trade, stating that the firm had violated legal requirements by offering a margin trading product without a clear target market determination. 

Crypt adoption is gaining momentum in Australia at a rapid pace.  A 2024 Swyftx survey revealed that close to 4 million (around 20%) of the population currently own digital currencies. Australia has one of the highest global crypto adoption rates, surpassing the US (16%), France (9%) and Switzerland (19%). The survey also revealed that one in three Australians said they’d be more likely to purchase digital assets with increased regulations.