Australia Introduces Cryptocurrency Exchange Regulations

  • Australian cryptocurrency exchanges will need to register and report to AUSTRAC
  • The new regulations are already in effect. Failure to comply will lead to "civil penalty consequences."

Australia has just implemented new regulatory obligations cryptocurrency exchanges will need to comply with. A recent announcement published by the Australian Transaction Reports and Analysis Centre (AUSTRAC) reveals the regulator is pushing against money laundering and seeking to bring forward counter-measures agaisnt terror financing. 

The announcement comes a week after the Australian Taxation Office (ATO) revealed it was seeking public consultation from citizens regarding how it should approach "specific tax events." Specifically, the ATO was looking for the public's views on cryptocurrency taxation, as it "launched a community consultation to help us understand practical issues experienced when complying with cryptocurrency tax obligations.”

According to AUSTRAC, cryptocurrency exchanges will now need to:

  • Adopt and maintain an AML/CTF program to identify, mitigate and manage money laundering and terrorism financing risks
  • Identify and verify the identities of their customers
  • Report to AUSTRAC suspicious matters, and transactions involving physical currency of $10,000 or more
  • Keep certain records for a period of seven years.

The legislation has been in effect for cryptocurrency exchanges since April 3, for a trial period of six months, which will help measure their success and relative impact on the market for users. During the six-month trial period, AUSTRAC CEO will only take action if exchanges don't take "reasonable steps" to comply.

At the end of its announcement, AUSTRAC notd:

"There will be criminal offence and civil penalty consequences if you provide digital currency exchange services without being registered."

AUSTRAC

Cryptocurrency exchanges are being urged to register, presumably to improve their level of accountability within the marketplace. Australia is also incorporating 'transitional registration arrangements' for crypto exchanges, which will come into effect on May 14. These arrangements will allow existing exchanges to continue trading, while transactions and applications are screened for legitimacy.

ErisX Tells Regulator's Why Ethereum Futures Would Create Better Markets

  • Nasdaq and Fidelity Investments-backed ErisX exchange sends explanation letter to CFTC.
  • Letter explains that regulated Ether-based futures contract would create more efficient crypto markets.

ErisX, a US-based digital asset exchange, has filed a comment letter with the US Commodity Futures Trading Commission (CFTC) - after the federal regulator requested more information regarding Ethereum (ETH)’s current market.

Submitted on Friday, February 15, ErisX’s letter asserted:

The introduction of a regulated futures contract on Ether would have a positive impact on the growth and maturation of the market.

As covered, ErisX is a newly launched cryptoasset exchange that received $27.5 million in starting capital from multi-trillion dollar investment manager, Fidelity and Nasdaq Ventures, which is Intercontinental Exchange’s (ICE) VC investment division.

Consistent With CFTC's Efforts

In December 2018, ErisX’s management revealed its plans to offer bitcoin (BTC), litecoin (LTC), and ether (ETH) spot trading and it also noted that it was seeking regulatory approval - in order to list cryptocurrency futures at a later point this year. Explaining why such futures contracts would help investors, ErisX’s letter noted that “listing and trading Ether futures compliantly on CFTC regulated markets is consistent” with the financial regulator’s efforts to create “open, transparent, competitive, and financially sound derivative trading markets.”

The letter from ErisX further mentioned that regulated crypto-based futures would “prohibit fraud, manipulation, and abusive practices in connection with derivatives and other products subject to the (Commodity Exchange Act) CEA.” According to the CFTC, bitcoin can be considered a commodity as it has been designed to potentially replace existing fiat currencies (as a medium-of-exchange). Because of bitcoin and ethereum’s decentralized nature, they are arguably not securities, the CFTC has clarified on several occasions.

Explaining the differences between the Ethereum and Bitcoin protocol, ErisX’s letter has stated: 

Ethereum built upon some of the architectural principles of Bitcoin to extend [its] functionality of [a] distributed, (cryptographically) secured, (blockchain-enabled) record-keeping system to include new computational capabilities for the execution of arbitrary code.

"Unregulated Exchanges And Brokers" Trying To "Fill The Gap"

Per ErisX’s analysis of current trends in the global Ethereum (and larger digital asset) market, there is still not a proper regulatory framework in place. This, according to ErisX, has discouraged several large enterprises from entering the fragile crypto ecosystem. At present, ErisX believes there’s a trend emerging in which “unregulated or lightly regulated ‘exchanges’ [and] ‘brokers’ [are trying] to fill the gap, many of them off-shore.” However, ErisX cautioned there may be certain risks associated with this type of market such as increased volatility and liquidity fluctuations.

As noted in ErisX’s letter:

Not unique to Ether, but [current crypto markets could suffer due to] the current fragmented global market structure of trading platforms and ‘exchanges’ with significantly varying degrees of regulatory oversight and operational transparency and integrity.

By introducing standardized, CFTC-regulated Ether-based financial products, ErisX argues the crypto space might receive a more positive response from institutional investors - which could potentially lead to “more robust, liquid, and resilient markets.”