Labor did not take a comprehensive policy on cryptocurrency regulation to the recent federal election.
It is likely the regulations will be carried by the newly minted minister for financial services, Stephen Jones. Jones has warned in the past that cryptocurrency is a “massive loophole for money laundering” and likened investing in crypto assets to “swimming outside the flags.” Labor members of the senate committee have also expressed concern about cryptocurrency-based scams and the need for enhanced consumer protections.
New federal police data shows cryptocurrency scams have exploded by 172% over the past year – but Josh
Frydenberg is doing nothing about it.
Crypto investors need certainty, and criminal platforms need to be taken offline.
These are legitimate issues. The Treasury Department’s current proposal already addresses them, in three ways.
First, licensing will be required for secondary service country email list providers such as digital currency exchanges, cryptocurrency brokers, custody management businesses, and NFT market operators. This provides regulatory certainty to industry and provides consumers with a clear signal about who the legitimate operators are.
Importantly, limiting licensing to secondary providers ensures that primary developers can continue to build innovative crypto projects.
Second, licensed companies will have to follow new rules. Proposed rules include enhanced obligations to comply with anti-money laundering laws, along with requirements to prevent fraudulent scams and providing avenues for dispute resolution.
Third, licensing with come with liquidity requirements or an obligation to hold crypto assets held on trust for consumers. This aims to prevent the situation where a digital currency exchange goes bust – such as MyCryptoWallet in 2021 – and leaves consumers as unsecured creditors with no recourse.
Further, cybersecurity standards will guard against theft from digital currency exchanges – such as the BitMark hack in 2021.
No going back
There is certainly space for the Labor government to put its own stamp on the legislation. Further measures around consumer education targeted at preventing cryptocurrency-based scams, or better enabling consumers to obtain due diligence from licensed financial advisors, are possible additions.
But Australia cannot afford to go back to square one. That would only see innovation move offshore and consumers unprotected for longer.
Industry voices have said that they are ready to work with the new government. But the federal government needs to have the “diamond hands” confidence to HODL, allowing the current reform process to continue.The Conversation
Aaron M. Lane, Senior Lecturer in Law, RMIT University
This article is republished from The Conversation under a Creative Commons license. Read the original article.