Australia took a step toward regulating its crypto sector with a consultation paper providing more clarity on the direction it will take.
The Australian government steered away from an “exhaustive, bespoke taxonomy" for crypto. Instead, it opted for a framework that groups crypto into intermediaries or service providers on one hand and public networks or smart contracts on the other. For these categories, officials want to know if some existing financial regulations will suffice.
The Office of the Treasurer of Australia, following the footsteps of the UK’s Treasury, which published a crypto consultation on Thursday morning, is looking to receive feedback from stakeholders from now until March 3.
Particularly, officials want to flesh out answers on topics like whether crypto should be regulated separately or within existing financial rules, how to protect investors and the role of smart contracts.
Same functions, same rules
The consultation cites a 1997 financial systems inquiry to argue that "functionally-equivalent products should be treated equivalently." The same approach can be traced back to the Financial Stability Board’s "same activity, same risk, same regulation" prescription in the global watchdog’s proposed framework for crypto regulation published in October.
The Australian government delivered on a promise made in December to produce plans for licensing and regulating crypto service providers, following the dramatic collapse of crypto giant FTX.
Next, officials plan to release a consultation proposing a licensing and custody framework for crypto asset service providers in mid-2023, and note that the ''logical next step'' is introducing a licensing regime with minimum standards for crypto asset service providers, including secure custody.
Boosting the regulator
In a separate announcement released in tandem with the consultation paper, the Albanese government said it plans to boost the size of the Australian Securities and Investments Commission’s crypto enforcement team. ASIC is a regulatory body overseeing crypto service providers through its licensing regime.
The Treasury is also looking to address “unsustainable business models used by some companies dealing in crypto assets (that) have left consumers exposed,” and to lay out requirements for crypto firms to “ensure they adequately safe-keep assets for customers.”
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