The Australian Securities and Investments Commission (ASIC) is gearing up to introduce a licensing regime for crypto service providers in Australia, as reported by the Australian Financial Review (AFR) on Sept. 23. Under the new rules, local crypto firms will be required to obtain licenses under the Corporations Act, as certain services they offer are categorized as financial products.
ASIC Commissioner Alan Kirkland stated that a significant number of crypto-asset firms operating in the Australian market are likely to need a license under the current law. This is due to the classification of many commonly traded crypto assets as financial products. Kirkland emphasized the importance of regulation in protecting consumers and addressing market misconduct. He highlighted that obtaining a license would help mitigate risks and ensure the safety of both the market and its participants. The expanded regulatory framework is also expected to facilitate safer access to a wider range of digital assets.
In a bid to gather industry feedback, ASIC plans to release updated regulatory guidance in the next two months. Industry experts view this move positively, as it will compel crypto firms to adhere to traditional financial standards such as transparency, consumer protection, and anti-money laundering compliance.
The decision to implement a licensing regime follows a 2023 Treasury proposal recommending the requirement for Australian Financial Services Licenses for crypto exchanges holding significant assets. This regulatory shift aims to counter fraudulent activities and ensure that investors are shielded from potential scams in the crypto space.
The escalating incidents of fraudulent activities linked to crypto have underscored the urgency for regulating the sector to safeguard investors. In the past year, ASIC has taken down more than 7,300 scam websites, with 615 of them associated with crypto. The Australian Competition and Consumer Commission also discovered that a majority of crypto-related ads on Facebook were fraudulent. Additionally, the Australian Federal Police disclosed that malicious actors have compromised over 2,000 Australian crypto wallets, resulting in the theft of millions in digital assets.
These alarming developments have raised concerns about the vulnerabilities in the crypto industry. The introduction of the new licensing regime aims to address these issues and establish a secure environment for crypto investors in Australia. It is a significant step towards enhancing consumer protection and combating illicit activities in the rapidly evolving crypto landscape.