Australia Mandates Financial Services Licenses for Crypto Firms by 2024

Australia will require all crypto biz to hold financial services licenses by November 2024 Australian Financial Review (AFR) has reported. This regulation aims to beef up transparency and security in the crypto market, ensuring that both investors and companies follow laid down rules.

The crypto market in Australia is currently somewhat unregulated, with varying players from well-known cryptocurrencies like Bitcoin and Ethereum to emerging tokens. This lack of clear regulations has introduced evident risks for investors.

AUSSIE LAW CALLS FOR CRYPTO FIRMS TO GET FINANCIAL LICENSES

Australia’s about to level up the crypto scene by making exchanges grab financial services licenses.

At the AFR Crypto and Digital Assets summit, ASIC’s Alan Kirkland dropped some knowledge, saying that heavyweights… pic.twitter.com/VnMrj0070C

— Mario Nawfal’s Roundtable (@RoundtableSpace) September 23, 2024

Available Details of the New Directives 

The Australian Securities and Investments Commission (ASIC) is leading this new regulation. According to ASIC commissioner Alan Kirkland, the financial services license will take care of various crypto assets, including major ones like Bitcoin and Ether. Firms will need to meet specific standards, such as maintaining adequate financial resources and implementing proper risk management systems.

Kirkland, at the AFR Crypto and Digital Assets summit in Sydney on September 23, stated, “ASIC believes that licensing and its subsequent protections will mitigate risk while bolstering consumer confidence and market integrity—two elements that are crucial in encouraging innovation in the financial system.” The commissioner then added that “ASIC expects to issue updated draft guidance in the coming months, which we will open up to feedback from the industry.”

Before his appearance at the event, Kirkland shared how the ASIC is preparing to inundate the Corporations Act’s Information Sheet 225 to clarify better how specific crypto tokens and named products should be handled from a regulatory perspective.

Likely Outcomes for Crypto Firms in Australia 

The new regulation will require crypto firms to comply with stricter requirements to operate legally. This could have a dual effect; that is, it will help eliminate bad actors and enhance market safety, but it may also birth setbacks for smaller firms that might struggle to meet the new standards, potentially hindering innovation.

For example, Binance, one of the world’s largest crypto exchanges, has already faced regulatory challenges in Australia. ASIC canceled Binance Australia’s financial services license earlier last year due to concerns about its compliance with local laws. Binance will need to reapply for a license with this new directive and ensure it meets all the mandatory requirements, such as having adequate financial resources and vast risk management systems. This could mean huge operational changes and high costs for Binance.

There are some misinformation (and confusion) about #Binance Australia.@Binance_AUS requested to cancel the derivatives license yesterday. The platform had exactly 104 users as of yesterday.@Binance_AUS will CONTINUE to operate the spot exchange in AU. 🙏 pic.twitter.com/nEExtG4U90

— CZ 🔶 BNB (@cz_binance) April 6, 2023

Independent Reserve, one of Australia’s household crypto exchanges, might find the new regulations both a drawback and an ample opportunity. The firm will need to invest in compliance measures to meet the new licensing requirements. However, the regulation could help Independent Reserve by weeding out less compliant competitors, potentially increasing its market share. CEO Adrian Przelozny has previously stated that clear regulations are essential for the industry’s growth and consumer protection.