Australia Seeks Feedback on Crypto Platform Rules Ahead of 2027 Rollout
Australia’s securities regulator ASIC has opened public consultation on proposed capital, custody, and trading requirements for crypto platforms as it prepares to implement legislation passed in April that broadens oversight of the crypto industry. The proposed framework includes three alternative capital models, restrictions on platforms trading for their own account, and quarterly reporting on wallets holding customer assets. ASIC also proposes allowing offshore custody while seeking feedback on safeguards if overseas related companies fail.
Broadening Crypto Industry Regulation in Australia
The Australian Securities and Investments Commission (ASIC) announced a public consultation Thursday on proposed rules concerning capital, custody, and trading requirements for crypto platforms. These measures are part of preparations to implement the Corporations Amendment (Digital Assets Framework) Act passed by Parliament in April 2024, intended to enhance government oversight and transparency within the digital asset sector.
ASIC Commissioner Alan Kirkland emphasized that the proposed guidance acknowledges the increasing role of digital assets and tokenization, including in traditional financial systems. The framework aims to provide crypto operators with clear requirements for licensing, safeguarding customer assets, and meeting financial thresholds under the new law.
Capital Models and Custody Principles
ASIC put forward three alternative capital models. One key model requires operators without qualifying third-party custody arrangements to hold a minimum of 14 million Australian dollars (about 9.7 million USD) in net tangible assets or 10% of average revenue, whichever is greater.
Amy-Rose Goodey, CEO of the Digital Economy Council of Australia, noted that her organization will rigorously examine the proportionality of the capital models for businesses of various sizes and the concessions available when third-party custody is used. Meanwhile, OKX Australia CEO Shange Chandra called the standards appropriately onerous, rewarding operators who have already invested substantially in compliance and custody, while challenging those who have not yet made such investments.
Offshore Custody and Customer Protection
ASIC proposes permitting offshore custody of digital assets, acknowledging the global nature of digital markets. However, the regulator is seeking feedback on whether Australian operators should have emergency access to private keys if an overseas parent company or custodian fails to fulfill its duties.
This proposal is considered significant as it balances global market realities with potentially necessary safeguards to protect Australian clients' interests.
Restrictions on Principal Trading and Conflict of Interest Mitigation
The proposed rules also impose restrictions on platforms trading for their own account and accepting benefits that favor specific tokens. These measures target reducing conflicts of interest and promoting fair trading practices.
Amy-Rose Goodey pointed out that such restrictions will require detailed analysis due to possible impacts on how Australian exchanges operate and gain liquidity access. Additionally, Shange Chandra advocated for streamlined licensing processes for established firms with proven compliance records.
Implementation Timeline and Next Steps
The consultation period runs until November 27, 2024. ASIC aims to finalize the standards and guidance by March 2027. The law will come into effect on April 8, 2027, with operators having until October 7, 2027, to apply for the relevant licenses. Operators will be permitted to continue their activities during the evaluation of their applications.
This schedule forms part of ASIC’s 18-month roadmap to roll out the Digital Assets Framework legislation.
Why it matters
Australia’s initiation of public consultation on detailed crypto platform regulations marks a significant move towards formalizing and enhancing government oversight of a growing digital economy. The April 2024 legislation expands regulatory scope by defining clear capital, custody, and trading requirements. Allowing offshore custody reflects the global nature of digital asset markets while incorporating safeguards to protect clients if foreign counterparties fail. Implementing these standards will improve trust among users and investors, foster a safer and more transparent operating environment, and encourage industry consolidation by rewarding compliant and responsible operators.
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