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.

Four Exchanges Represent 96% of Crypto Derivatives Trading, Report Shows

Four exchanges represent 96% of the total crypto derivatives trading volume. According to figures from CryptoCompare’s December 2019 Exchange Report, OKEx is the leading exchange in crypto derivatives trading.

The report shows that during December, OKEx registered an impressive $3.32 billion in daily trading volume. This represents 35.8% of the total market share in crypto derivatives.

Following closely behind is Huobi, with $2.7 billion in daily trading volume and a 29.16% market share. Further behind is BitMEX, with a volume of $1.9 billion and 19.7% market share, and Binance, with a volume of $797 million and 11.4% market share.

Out of all the big exchanges listed above, OKEx was the only one that saw its volume go up. Trading a total of $99.6 billion in crypto derivatives in December, OKEx registered a growth of 11% in comparison to the previous month. Huobi registered $76.5 billion but showed a 14.5% decrease in volume from November, and BitMEX accounted for $51.1 billion and was also down 28.8%.

OKEx was also the third biggest exchange in Ethereum perpetual futures. Following behind it was BitMEX (44%) and Binance (23.2%), OKEx controls roughly 20.8% of that market with a $1.7 billion in trading volume.

Market Leader in Crypto Derivatives

Although BitMEX is leading in the ETH and BTC perpetual futures, OKEx is the top exchange when it comes to crypto derivatives. Founded in 2017 and based out of Malta, OKEx is one of the biggest cryptocurrencies in the world. In fact, in May 2018 OKEx was the world's largest cryptocurrency exchange by reported turnover.

Having launched its own native token in early 2018, the OKB token, the OKEx team is actively working to improve its platform and services. OKEx has its own blockchain in the final stages of testing, OKChain, and has future plans to release a decentralized exchange, OKDEx. Both these products will expand the OKEx ecosystem and add features to its OKB token.

Despite these developments, OKEx continues to focus and give special attention to the derivatives market. In recent months, the company released a data analytics platform for derivatives trading, Bitcoin futures contracts margined with Tether (USDT), and Bitcoin options trading that are scheduled for public launch this month of January.

Despite the success, many in the industry have questioned OKEx’s trading numbers, accusing the company of wash trading, fake volumes and market manipulations.

Growing Popularity

The crypto derivatives market has shown fierce growth since the Chicago Board Options Exchange (CBOE) started trading bitcoin futures back in 2017. Crypto derivatives have grown throughout 2019, both in numbers and in product variety, and most exchanges who adopted such types of products have registered unprecedented growth.

Despite their bad reputation, commonly pointed as the cause behind the fall of America’s former energy and commodities firm Enron, derivatives have brought growth and attention from the general public to the crypto industry. And this trend seems to be ongoing, as just two weeks ago the Chicago Mercantile Exchange (CME) released the long-awaited Bitcoin options, sparking tremendous interest from investors and fueling the busiest crypto derivatives trading day of 2020.

The launch of Bitcoin futures by the CBOE and the CME caused significant price spikes, and promoted the interest of the general public on cryptocurrencies, opening it to a wider audience. It is possible futures will make the crypto market more stable, as in traditional finance it has been shown to make the underlying asset balance out price fluctuations.