Australian cryptocurrency regulation in the wake of the downturn

by Arthur · July 12, 2022

Related practices and jurisdictions

In the wake of the long downturn in the cryptocurrency market, increased regulation of the sector seems inevitable. With almost one million Australians trading in cryptocurrencies last year, there have been widespread calls for further protection for retail investors.

This table outlines important regulatory developments from Australian financial regulators regarding the possible treatment of cryptocurrencies.

Regulator	Current work	Timeline
Treasury	Considering the introduction of new licensing and custody requirements for companies that offer services related to cryptocurrencies (such as stock exchanges and other intermediaries).	Public hearings were recently concluded. Any reforms are likely to include a significant transition period for existing operators
ACCC	Establish mechanisms to enable the ACCC to implement measures under Australian consumer law to protect consumers.	Ongoing
APRA	Preparation of an internationally adapted supervisory framework for cryptocurrencies and related activities.	Valid by 2025
ASIC	Continues to apply the current regulatory regime, pending the development of the Treasury.	See above
RBA	Review of the introduction of a digital central bank currency.	Ongoing

The key priorities for regulators appear to be consumer protection, the maintenance of a fair and efficient financial system (including with regard to cryptocurrencies), and the promotion of innovation and foreign investment in Australia. Consequently, the Minister of Finance, Stephen Jones, has recently indicated that the new government will consider cryptocurrency regulation as part of the larger overhaul of digital payment systems.

The most important challenges for regulators will be to deliver on these conflicting and partly competing goals. The existing framework for financial markets is unlikely to translate well into crypto exchanges. A more tailored approach will be needed to achieve both the goals of consumer protection and competition.

The Council of Financial Regulators has also explicitly advised banks against de-banking the crypto area and recognized the importance of a robust regulatory framework for this market. Furthermore, in its first interim report on financial services law reform, the Australian Law Reform Commission briefly recognized cryptocurrencies as a new market in Australia.

With more Australians exposed to this volatile sector than ever before, there is no doubt that cryptocurrencies are now part of the ordinary financial system (and perhaps less uncorrelated as once thought), and many organizations are seeing the benefits of spending more traditional regulatory oversight of this asset class.

The last months of cryptocurrency have been instructive – showing that market risk is real and cannot be ignored.