The Australian Securities and Investments Commission (ASIC) has unveiled a proposal to impose strict licensing requirements on crypto companies.
This decision, described during a consultation article published on December 4, 2024aims to classify many digital assets as financial products, requiring companies that manage them to obtain the appropriate licenses.
The proposed guidelines signal a tougher compliance stance within the crypto industry, described as a “wake-up call” by Kate Cooper, CEO of Standard Chartered-backed Zodia Custody.
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Crypto exchanges will need more licenses
Under current Australian laws, businesses offering financial services or dealing in financial products must obtain an Australian Financial Services License (AFSL). Additionally, platforms facilitating the trading of these products may require an Australian market license.
The new rules would extend these requirements to crypto exchanges and many other digital asset companies. Industry experts have expressed concerns about the financial burden these regulations could impose, particularly on small businesses.
Liam Hennessy, a partner at law firm Clyde & Co and an assistant professor at the University of Sydney, warned that while larger companies could absorb the costs, smaller startups could struggle.
Crypto lawyer Joni Pirovich echoed this sentiment on LinkedIn, noting that the guidelines could make starting a crypto business in Australia as costly, or more so, than doing so overseas.
“Australian innovators looking to get started may now consider moving their operations overseas,” she wrote.
INSIGHT: Crypto compliance ‘no longer optional’ under Australia’s new draft guidelines
The proposed sweeping changes would require most crypto companies in Australia to obtain a financial license, which some fear could push innovators overseas. pic.twitter.com/xzXRlUVCOV
-Verma (@CoinCipher3) December 4, 2024
INSIGHT: Crypto compliance ‘no longer optional’ under Australia’s new draft guidelinesCharlie Karaboga, co-founder of Block Earner, whose company was previously sued by ASIC for offering an unlicensed crypto yield product, shared his concerns about the financial requirements.
Karaboga said ASIC’s expectations, including holding millions of dollars in reserves, could stifle startups like his.
ASIC’s proposal includes an expanded definition of financial products to cover stablecoins, staking services, exchange tokens and wrapped tokens. However, Bitcoin, Ether, gaming-related NFTs and memecoins could escape these classifications, providing some relief to the industry.
Meanwhile, ASIC has invited feedback on the proposed updates, with submissions open until February 28, 2025. A finalized version of the guidance is expected by mid-2025.
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Australia lost $122 million to crypto scams in 12 Month
Australians were victims crypto scams totaling AU$180 million ($122 million) in 12 months. According to the Australian Federal Police (AFP) report, the majority of victims are under 50 years old.
In an August report, the AFP revealed that a staggering number 382 million Australian dollars ($269 million) was lost to various investment scams over the past year. Notably, 47% of these losses were linked to cryptocurrency fraud.
As noted, Australia financial market conduct regulator (ASIC) has removed over 600 crypto scams over the past 12 months. The regulator also helped take down 5,530 fake investment platform scams, 1,065 phishing scam hyperlinks, and 615 crypto investment scams.
In March, Australia’s prudential regulator asked banks to report their exposures to crypto companies and startups. This order followed the bankruptcy of Silicon Valley Bank.
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