Australia to Mandate Financial Services Licenses for Crypto Start-ups
Australia is preparing to implement new regulations that will require cryptocurrency firms to obtain financial services licenses under the Corporations Act. This announcement was made by Australian Securities and Investments Commission (ASIC) Commissioner Alan Kirkland during the AFR Digital Assets Summit.
Kirkland noted that many crypto-asset companies in the country will need to be licensed, as ASIC views various crypto assets as financial products under existing legislation. The current regulatory framework primarily addresses "financial products," which include financial investments, risk management, and non-cash transactions. However, certain aspects of the cryptocurrency landscape do not fully fit this framework, leading to uncertainty regarding the necessity for licensing for specific crypto structures.
In response, ASIC plans to release draft guidance soon and will invite feedback from the industry on these updates. "Millions of Australians are now investing in crypto assets, and ASIC is committed to ensuring they receive the essential consumer protections offered by our regulatory framework," Kirkland stated.
Many crypto developers in Australia have previously avoided obtaining Australian Financial Services Licenses (AFSLs), often based on legal advice suggesting that their investment products do not fall under current laws. To address this gap, ASIC is expected to clarify the classification and treatment of particular crypto tokens that signify digital ownership rights and related products by November.
Kirkland emphasized that the licensing initiative aims to mitigate risks, enhance consumer trust, and uphold market integrity in the crypto space. ASIC has ramped up its enforcement efforts, indicating a stronger focus on the industry. Recently, the agency criticized Kraken for failing to adequately inform Australian clients about the risks associated with margin trading, leading to significant losses for customers.
Additionally, in August, ASIC launched legal proceedings against the Australian Securities Exchange (ASX), alleging mismanagement of the blockchain-based CHESS replacement project, further underscoring its commitment to stricter oversight of the crypto sector.
