Australia proposes tougher regulations for crypto industry with new licencing rules

The Australian Securities and Investment Commission (ASIC) has released a consultation paper outlining new guidelines for the crypto industry, which would mandate that many firms obtain financial licenses.

This move marks a significant regulatory shift, classifying various digital assets as financial products that require compliance with Australian financial laws.

Under the proposed guidelines, crypto exchanges and firms dealing in digital assets would likely need to secure either an Australian Financial Services License (AFSL) or an Australian Market License. Currently, businesses offering financial services in Australia must hold an AFSL, and trading platforms may also require an additional license.

Industry experts have raised concerns that these new requirements could negatively impact small and startup businesses. Liam Hennessy, a partner at Clyde and Co, pointed out that while larger firms could more easily absorb the associated legal and compliance costs, smaller companies may struggle to meet the new standards.

Joni Pirovich, a crypto lawyer, warned that the updated guidelines could make it more expensive for Australian innovators to launch local ventures, putting them at a disadvantage compared to offshore alternatives.

Despite the aim of providing greater market clarity, the proposed regulations have raised alarms about a potential exodus of crypto firms from Australia. Charlie Karaboga, co-founder of Block Earner, said that the financial reserves required to obtain an AFSL could place many startups at risk.

The ASIC’s guidelines expand the definition of financial products to include stablecoins, staking services, and wrapped tokens. However, certain digital assets such as meme coins and gaming-related NFTs may be exempt from this classification.

Feedback on the draft guidelines is open until February 28, 2025, with a final version expected by mid-2025. ASIC has stated that it aims to balance consumer protection with fostering financial innovation in the evolving crypto landscape.