Australia proposes significant regulatory reforms for digital asset platforms
The Australian Treasury has proposed a new regime that would bring digital asset platforms within the scope of the Australian Financial Services Licence (AFSL) framework.
Australian treasury proposes new regime for digital asset providers
The proposals specifically aim to tackle “consumer harms” associated with digital assets, which the government says have been perpetuated by ineffective management practices, inadequate governance structures, poor operational resilience, widespread conflicts of interest and instances of fraudulent activities.
To mitigate these risks, the proposed regime encompasses four core amendments to current legislative procedures.
Firstly, digital asset platforms are to be held to the same standard as other financial services providers under the country’s existing framework, through what the proposal describes as a “similar activity, similar risk, same regulatory outcome” approach.
The second amendment expands the scope of licencing for digit asset platforms, which if ratified into law, would require any business providing custodial or depository services, financial product advice, or holding more than AUD 1,500 per client or more than AUD 5 million in total assets to obtain an AFSL.
Thirdly, the proposals target facility contracts, which enable facilities to evolve into platforms through paring with other functions. As part of this specific amendment, all arrangements involving digital asset facilities would be required to be structured as non-discretionary arrangements, which means that facilities must operate in accordance to pre-agreed and transparent rules and procedures.
The final proposal concerns the regulation of digital assets that are not specifically defined as financial products, for example, tokenised collectables. This amendment means that platforms that deal with these types of products would now be required to meet minimum standards and functions surrounding areas such as token staking and asset tokenisation.
The immense scale of this legislative effort is evident in the supposed timeline of its implementation. The Treasury is to welcome feedback on its latest publication until 1 December 2023, and is not expected to release its exposure draft legislation until next year, although the exact date has yet to be defined. It also suggests that it could take up to 12 months for platforms to acquire the necessary licencing.
The Treasury adds that it hopes the new rules will also support “innovation in the uses of digital assets and emerging technologies”.
In addition to these proposed amendments, the Australian government has continued to explore the use and application of digital assets, with its efforts being most noted in its limited scale pilot of a central bank digital currency (CDBC).
Following this pilot, the government later admitted that the full-scale issuance of a digital coin was some years off as a consequence of unresolved issues that arose from its preliminary testing. Despite this, if its latest proposals signal anything, it’s that those down under are taking a step in the right direction towards the mass but controlled adoption of digital assets.
