While most countries are still undecided on how to regulate crypto, Australia is well ahead of the pack in formulating regulations around cryptocurrencies and allowing growth of this industry in a secure environment. Australia, much like Switzerland and Singapore, has a friendly approach towards the crypto industry this attracting investments from global firms. Crypto trading platforms operating in Australia, must be registered with AUSTRAC (The Australian Transaction Reports and Analysis).
In 2018, AUSTRAC announced the implementation of more robust cryptocurrency exchange regulations. The new crypto regulations require exchanges operating in Australia to register with AUSTRAC, identify and verify users, maintain records, and comply with government AML/CFT reporting obligations. Going forward, unregistered exchanges will be subject to criminal charges and financial penalties.
AUSTRAC encourages pro-crypto regulations, and also ensures that the crypto exchange operations comply with the KYC-AML rules, while also preventing the use of cryptocurrencies for crime. While Australia is known for its positive attitude towards crypto-blockchain startups, the country has strict regulations in place for crypto-focused businesses to operate legally within the nation.
Effects of Adoption of Crypto
The concept of technological innovation improving the business of finance is a positive change that has been anticipated for some time by the financial institutions in Australia. The pace of change in technology makes predicting the future difficult, hence this makes it hard for Australia to know whether the financial world in the country will face evolution or revolution. Several scenarios on effects of adoption of crypto include the following:
- Agile new fintech companies, better able to tailor their services to customers’ individual needs and built on modern technology platforms, could eat into the market-share of the large incumbents, and replace existing small incumbents;
- Big technology companies, with strong brand and advanced technology, could elbow their way into the financial sector, taking the major occupation as the dominant market players; or
- The incumbents, using their regulatory and funding advantages as well as inherent customer stickiness, could partner with and eventually subsume new market entrants, thereby maintaining their market positioning.
The dilemma regulators face in this rapidly changing environment is largely the same as that confronting businesses: trying to anticipate how technology will change the financial services sector, and being sufficiently responsive to keep pace with those changes. A major challenge that technology poses for regulators is the growing trend towards outsourcing and partnering; which are increasingly occurring for business-critical functions.
In an attempt to keep the technological underpinnings of digital currencies, a number of Fintech companies have come to market with a set of new stable coins that try to balance the erratic price movements of other tokens by maintaining a steadier value by pegging its price to a traditional currency or another asset. Despite many of the obvious and inherent benefits of digital currencies that are perfectly timed for the digital age, broad adoption requires more individuals to encounter the advantages themselves, something that is unlikely to happen when a shifting regulatory landscape could disrupt the process.
All these impacts will not be restricted to Australia. Blockchain has progressively become an ordinary piece of life for organizations and people, and behind the scenes, it has been quietly becoming indispensable to infrastructure. Australia could decide to drop its encryption law or amend it to suit their needs as a country.
Regulation of decentralized systems was going to pose a challenge, especially where regulators don’t have a firm grasp on the underlying technology. But there’s a good chance that Australia’s new encryption laws could actually lead to better, rather than worse regulation. Experience of trying to exclude blockchain from business, personal and governmental life could lead future legislative efforts, in Australia and elsewhere, in a more benign direction.
Valsen Fiduciaries Group Solutions
At Valsen Fiduciaries Group, our experienced staff, combined with our global network, allow us to provide the ongoing support you need – wherever you need it, at home and abroad, whatever the size of your organisation. To learn more about how your business can set up a Crypto trading platform operating in Australia, please contact us today.