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Digital Assets Regulation in Australia: What Businesses Need to Know


The Australian government has recently announced significant proposed changes to digital asset platforms.

We delve into the main changes around regulations, compliance, and the need to hold an ASFSL to help you understand what these changes may mean to you.


Introduction

A recent consultation paper released by the Treasury in Australia has proposed significant changes to the regulation of digital asset intermediaries. These changes, if implemented, will significantly impact businesses operating within the digital assets space. This blog post aims to provide an overview of these proposed changes, highlighting their potential implications for businesses.


Proposed changes

The proposed regulatory framework introduces a new concept called a "digital asset facility". This term encompasses a broad range of services, including asset holding arrangements and digital asset platforms that allow customers to transact. These concepts are essentially rights or obligations that arise from transactions conducted on a digital asset platform.


Under the proposed regulations, entities providing financial services in relation to a digital asset facility will be required to hold an Australian financial services licence (AFSL) and comply with general obligations such as providing information and assistance to the Australian Securities and Investments Commission (ASIC), maintaining dispute resolution systems, and having a enterprise risk framework and management system.

Furthermore, the paper proposes minimum standards. These standards include requirements for holding assets, intermediating platform entitlements, and managing transactional functions.


Functions that will be regulated

Importantly, financialised functions, such as token trading, token staking, asset tokenisation, and funding tokenisation, are subject to additional requirements. Such functions are often associated with greater risks, thus necessitating enhanced regulatory oversight.


Moreover, platform providers must meet financial requirements, provide a financial services guide to retail clients, and comply with disclosure requirements. The aim of these requirements is to ensure transparency and protect the interests of consumers.


The consultation paper also addresses future considerations and provides guidance on what digital assets/crypto businesses can do to prepare for the proposed regulation. It encourages businesses to proactively engage with the regulatory framework and take necessary steps to ensure compliance.


Recognition that digital assets are here to stay

The proposed changes underscore the Australian government's commitment to fostering a robust and secure digital asset environment. By imposing these regulations, the government aims to protect consumers and businesses alike, promoting trust and transparency in the digital asset market.


However, these changes could also present challenges for current businesses operating in this space. The need to obtain an AFSL, comply with enhanced conduct and compliance requirements, and adhere to new standards which may impose significant administrative and financial burdens on businesses.


Therefore, it is crucial for businesses to stay abreast of these proposed changes and prepare accordingly. This might include seeking legal advice, reviewing existing business practices, and implementing necessary changes to ensure compliance.


Conclusion

In conclusion, the Treasury's consultation paper represents a significant step towards the regulation of digital assets in Australia and an acknowledgement that they are now a permanent part of the financial system. It also means that Australia will begin catching up with the rest of the world in regard to regulation of digital assets.


While these changes may pose challenges for businesses, they also provide an opportunity for businesses to demonstrate their commitment to transparency, security, and customer protection. By proactively engaging with the regulatory framework, businesses can position themselves to thrive in the evolving digital asset landscape.

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