Australian regulators expand the country’s crypto rules in latest guidance

Australian regulators expand the country’s crypto rules in latest guidance

Two of Australia's top regulators have issued guidance on best practices for companies dealing with crypto, aiming to improve financial clarity for the country's emerging digital asset industry.

Both the Australian Transaction Reports and Analysis Center ( AUSTRAC ) and the Australian Prudential Regulation Authority ( APRA ) issued statements on Wednesday outlining perceived risks and expectations in dealing with the emerging asset class.

Unlike neighboring jurisdictions, including Singapore, whose digital asset rules are well established, crypto regulation in Australia consists of a patchwork of rules drawn from the traditional financial sector.

Recent guidance from the country's regulators marks a major step towards greater clarity for crypto companies operating in Australia, coupled with the proposed regulatory framework. It follows an earlier policy proposal that aims to regulate everything from crypto taxation to the licensing of digital asset exchanges.

AUSTRAC, which is responsible for monitoring and responding to financial crime, has championed the well-worn narrative that with increasing crypto adoption comes increased risk of criminal activity.

“Financial services providers need to be alert to signs of criminal use of digital currencies, including their use in ransomware attacks,” AUSTRAC CEO Nicole Rose said in a statement.

In his guide on “Preventing the criminal misuse of digital currencies in financial crime” AUSTRAC provides instructions for companies detecting tax evasion, terrorist financing, fraud and money laundering.

AUSTRAC also provided guidance to companies on how best to identify and prevent cases of ransomware attacks that aim to use crypto as a liquid extortion tool.

“Digital currencies such as Bitcoin have enabled cybercriminals to demand larger ransom amounts and obtain payments more easily, increasing the profitability and attractiveness of ransomware,” AUSTRAC wrote.

It also drew on findings from last year's Senate committee on "Australia as a technology and financial hub", which heard de-banking cases of crypto industry participants by the country's largest financial institutions, including some of Australia's "big four" banks.

De-banking is a supposedly traditional banking practice in which financial institutions terminate the accounts of crypto companies, often without giving any reason. In one case, the committee heard the case of Bitcoin Babe founder Michaela Juric, who had her banking services terminated more than 90 times over the course of her company's seven-year lifespan.

“AUSTRAC prevents financial institutions from indiscriminately and widely closing accounts across entire sectors,” the regulator wrote in its guidance. "De-banking legitimate and lawful businesses can have a negative impact on individuals and businesses. It can also increase the risk of money laundering and terrorist financing and have a negative impact on the Australian economy."

AUSTRAC has authority over financial services, including crypto exchange providers, across the country.

APRA policy

APRA – which oversees banks, credit unions, insurance companies and pension schemes, among others – underpinned this guidance and set out its expectations for regulated entities to take a “prudential approach” to managing associated digital asset risks.

In his letter Written by APRA boss Wayne Byres, the regulator calls on companies within its jurisdiction to understand and mitigate harm and carry out appropriate “due diligence” while applying “robust risk management controls”.

“Companies must also ensure they comply with all conduct and disclosure requirements administered by [the Australian Securities and Investment Commission],” APRA wrote.

Earlier this month, Byres asked Australian financial institutions to be cautious when dealing with crypto, announcing the expected release of the letter on Wednesday.

“By all means innovate, but do so cautiously and with full knowledge of the risks,” Byres said at the time.

APRA is developing a longer-term framework for crypto activities in Australia and has set out its three-year plan via a policy roadmap that will first consult and then progress its efforts to establish new and revised operational risk management requirements.

The regulator is also exploring possible approaches to “prudential” regulation of stablecoins – cryptocurrencies whose value is tied to fiat or commodities – by eventually bringing them within the scope of the Stored Value Facilities (SVF) regulatory framework.

SVFs refer to payment services that allow customers to store funds in a facility to make future payments.

Subject to developments in the broader legal and regulatory framework, APRA said it intended to consult on regulatory requirements for large SVFs sometime next year.

“APRA will continue to closely monitor industry trends and emerging risks related to crypto assets, work with other regulators domestically and internationally, and provide further guidance as necessary,” it said.

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The Post Australian Regulators Advance Country’s Crypto Rules in Latest Guidance is not financial advice.