Australia is proposing a licensing system for the crypto industry, requiring digital asset platforms with assets exceeding a specified threshold to obtain an Australian Financial Services Licence. The licence will be linked to various financial functions, including token trading, staking, tokenization, and token-based fundraising, potentially covering non-custodial exchanges. According to a consultation paper, crypto exchanges holding over AUD1,500 for a single client or more than AUD5 million in total assets would need a licence.
Specific obligations, such as providing disclosure documents to retail clients and adhering to minimum standards for digital asset custody, will be tailored for different activities, says law firm K&L Gates. The minimal criteria for the custody of digital assets will outline the organisational framework, staffing proficiency, and the capability and resources needed to carry out essential administrative tasks. These standards will closely resemble those presently enforced for conventional custody service providers.
Notably, the new regime emphasises holding digital assets on trust for clients and imposes technical standards for crypto safeguarding. Non-fungible token (NFT) marketplaces which hold customer assets may also require licensing.
Transitioning to the new system is mandated within 12 months for crypto exchanges once the new regime takes effect in 2024, with the licensing process possibly extending until 2025. The industry has until December 1, 2023, to provide feedback on the proposal.
