Are you in search of crypto regulation in Australia? Yes! The crypto market around the world has attracted more entrepreneurs. Numerous jurisdictions provide investors with excellent conditions for launching a crypto business. Among those countries, Australia stands out. 

Do you know why? Let’s move on to the next session

An Insight of Crypto Regulation in Australia

Since 2017, cryptocurrencies and crypto exchanges have become legal in this jurisdiction. In Australia, at a 1:5 ratio, 18% of the population started to own cryptocurrencies. The Australian government treats cryptocurrency as property. So that people can legally sell, buy, store, and use in daily transactions. 

Australian economic condition

The Australian economic condition provides continuous support for the development of technological innovation in several domains like investment, payments, lending & borrowing, crypto assets, and more custodial services. This creates a good environment for startups and entrepreneurs who wish to innovate in these areas. 

The Australian government started to actively introduce cryptocurrencies into various spheres of life, thus making the country stand out in this field. In addition to this, the government also introduces DeFi technology research centers, supporting numerous DeFi-related projects. 

In Australia, cryptocurrencies are used to pay taxes and are also used as savings for retirement. A few years ago, Australian banks created the 1st blockchain product for commercial banking in the country. This illustrates the growth of digital banking. The larger number of cryptocurrency ATMs highlights the popularity of cryptocurrency in Australia.

To ensure the safety of cryptocurrency transactions, the Australian government has implemented several legal measures to regulate the blockchain sector in the country. One of the measures is to acquire a license to start financial-related activities like cryptocurrency exchanges in Australia. These authorization documents provide legality to all businesses related to finance including the use of cryptocurrency. 

Recognizing the potential of cryptocurrencies, the Australian government actively boosts innovation, stimulating the growth of the blockchain industry in the country. Entrepreneurs who wish to start a crypto business in this jurisdiction can access several benefits. This is possible only when you complete the licensing process. 

But you may wonder what the requirements are and how to satisfy compliance with Australia’s financial system. This article helps you to explore Australia’s legal regulatory framework, licenses, KYC/AML verifications, and more to mitigate the risk of non-compliance and also helps you to enhance your onboarding protocols. 

Legal framework for crypto-business in Australia

Currently, in Australia, there is no specific regulatory framework for cryptocurrencies. Legislation is applied to cryptoassets based on their functional characteristics. 

For example, if your exchange allows tokens to be traded, then definitely your crypto exchange must get a broker license. 

Hence, it is most important to identify the nature of the cryptocurrency you are going to use. 

Since 2009, Australia had a code of conduct for virtual currencies. This forms a basic standard in the blockchain market. This code addresses several aspects like customer safety, staff safety, AML, and other issues. 

Entrepreneurs interested in acquiring a crypto license in Australia have to undergo the following regulatory frameworks. 

AML & KYC regulations in Australia

Like other member countries of the FATF (Financial Action Task Force), Australia’s KYC requirements include AML and CTF (countries Anti-Money Laundering & Combating Terrorist Financing) regime. 

Australia’s KYC requirements are linked with FATF’s standards, this ensures the company collects and examines customer information in accordance with international best practices. 

The AML/CFT Act 2006

The AML/CFT Act 2005 outlines Australia’s regulatory framework for financing terrorism and money laundering. It briefs about the regulations, expectations, and penalties for non-compliance. This act is applied to various businesses and professions, like

  • Cryptocurrency exchanges
  • Banks
  • Bullion dealers
  • Casinos
  • Financial institutions

Under the legislation, businesses have to undergo CDD (Customer Due Diligence) procedures. At the same time, if any large cash transactions or suspicious activity take place then the company has to report to AUSTRAC (Australian Transaction Report and Analysis Centre). Moreover, companies are advised to maintain records of customer information for at least seven years after the provision of any services has been stopped. 

The Privacy Act

In addition to KYC, Australian firms have to include the country’s  Privacy Act,t. This act covers all personal details that have been gathered and verified during the customer identity verification process. As this kind of data is highly sensitive, companies have to consider storing the data with a higher level of privacy protection according to the Australian Privacy Principles (APP).

APP outlines the steps that the company has to guarantee the security of personal data collected throughout the KYC process and also the steps to be carried out to be destroyed or de-identified once the data is no longer needed. 

Australian regulators are also governed by other laws, which include:

Competition and Consumer Act 2010 – denies misleading customers & offenders such as sponsors, issuers, and other platform participants are all subject to prosecution

Corporations Act 2001 – Under the regulatory framework, any entity offering financial services involving crypto assets within Australia must obtain the necessary license. This includes activities related to investment products or exchange-traded products involving cryptocurrencies.

National Consumer Credit Protection Act 2009 – Under the established credit activities and services regime, cryptocurrency lending activities necessitate obtaining a credit license to operate legally.

Electronic Transactions Act 1999 – The regulatory framework governs electronic transactions, encompassing self-executing transactions facilitated by blockchain or distributed ledger technology.

Australia’s financial regulators

There are 3 main financial regulators in Australia:

  • AUSTRAC  provides enforcement measures, tools, and AML/CTF guidance for companies under its supervision. The regulatory bodies act as instrumental in updating Australia’s framework for combating money laundering. 
  • ASIC (Australian Securities and Investments Commission) continuously monitors markets and institutions to ensure that they operate ethically and fairly. This commission advocates individuals and institutional organizations. 
  • APRA (Australian Prudential Regulation Authority) oversees Australian financial institutions. It concentrates on the safety and stability of the financial system, 

The timeline for obtaining a crypto license in Australia

As of March 2024, there is no standard process or timeline for acquiring crypto licensing in Australia. This is because the legislation governing cryptocurrency activity is still under development. A draft regarding the regulatory framework for the cryptocurrency industry was submitted in late 2023. However, the decision and licensing details regarding financial activity have not been announced till now. The ASIC is the licensing authority for cryptocurrency businesses like crypto exchanges. 

So as per current legislation, any businesses related to digital currency must register with AUSTRAC and ASIC. With this registration, you can do any financial service within Australia. 

Now you may have the question of how to apply for an AFS license. Here let me guide you through the steps to apply online through the ASIC portal. For this, you may need of few documents which must be attached to the application. These include:

  • Business description – details regarding the company, who is the owner, management process, and what they are going to offer;
  • Financial information – business plan, Audited account;
  • personnel information – details regarding the qualifications and experience of the employee in the company;
  • systems and controls – explanation of risk management and compliance systems

In addition to all the information, ASIC also requests for some more data or conduct 

Generally, the application process may take from 3 to 6 months. On approval of the application by ASIC, the company is granted with AFS license. This license is valid only for 12 months, after that the company must renew the license. 

In addition to an AFS license, if you are interested in providing a wide range of crypto services, then you have to acquire an Australian credit license and insurance license, especially for cryptocurrency products. 

Open a Cryptocurrency Exchange in Australia

In Australia, local companies are approved to conduct cryptocurrency transactions. The best way is to register as a Limited Liability Company. This means the financial liability of the company is limited to the contributed capital. 

Key Steps to Register as a Cryptocurrency Exchange in Australia

  • Determine the kind of transaction that your exchange plans to do
  • Choose the legal form of organization;
  • selection, verification, and reservation of the name of your exchange
  • Collecting details of shareholders, management personnel, and also information about the exchange’s beneficiaries. 
  • Choose the legal address for your exchange
  • Preparation of documents for the registration process
  • Register the exchange through the Australian government BRS (Business Registration Service).
  • Register with Tax authorities
  • Open a corporate bank account

This is just a rough overview of the company registration process in Australia. For furthermore details you contact InnBlockchain. 

Required documents

Entrepreneurs who are interested in starting financial transactions with cryptocurrency in Australia have to provide the regulator with a set of documents. This includes:

  • A Business plan that helps the Australian Commission to understand the company’s financial projections, strategies, and goals. 
  • Transaction rules that describe the cryptocurrency transactions. This document explains how your exchange identifies users, reports suspicious transactions, and more. 
  • Evidence for the financial stability of your exchange. So that the regulator can confirm that you have enough funds to conduct efficient operations and to handle risk. 
  • CVs of founders, managers, shareholders, and beneficiaries of your exchange. This includes their education, work experience, passport data, criminal record, and other information. 

For more details, you can contact InnBlockchain. Who help you in all the ways. 

Requirements for Obtaining a Crypto License in Australia

Currently, to launch a cryptocurrency exchange in Australia you are in need of compliance with regulatory requirements set by AUSTRAC and ASIC. As of today, here let me list out some of the general requirements:

  1. Business registration: 

Before you begin to apply for a crypto license, you have to register your crypto exchange business with ASIC. This involves selecting the appropriate legal form for your organization like trust or company or partnership. 

2. AUSTRAC compliance 

If your business is going to deal with digital currencies then you have to definitely register with AUSTRAC as a digital currency exchange service provider. The registration involves compliance with AML and CTF requirements. Moreover, you have to implement strong KYC and AML procedures. This involves customer identification, continuous transaction monitoring, and reposting suspicious transactions to AUSTRAC. 

3. Application for an Australian Financial Services (AFS) License. 

If your business provides financial services like trading or going to provide investment advice based on digital currencies then you have to apply for an AFS (Australian Financial Services) license from ASIC. To acquire this license, you have to address all the compliance with financial legislation to satisfy organization and operational requirements. 

4. Financial strength 

The company must have enough capital and liquidity. 

5. Business Reputation

The company should have a good business reputation

6. Competence

You must have sufficient knowledge and experience.

7. Contingent Provisioning and Insurance

You must implement enough security plans and professional liability insurance to stop operational risks and safeguard users at the time of financial loss. 

8. Technical security and risk management

You have to implement strong cybersecurity measures and risk management frameworks to safeguard your platform’s data and your user’s assets from cyber threats and vulnerabilities. For this, it is better to approach InnBlockchain, a crypto exchange development company that will guide you in all ways.

In October 2023, the Australian government presented a draft regulatory framework for cryptocurrency exchange. It incorporates licensing and custody rules for providers. According to the bill, cryptocurrency exchanges seeking a license from ASIC have to meet the above-listed requirements. Out of this one of the most important requirements is to have at least $5 million on the exchange, or the admin has to maintain $1500 in all customer’s accounts. 

However, as of March 2024, crypto regulation is in a state of transformation. So it’s important to check the updated regulations on the ASIC & AUSTRAC websites or consult a legal expert. To make your work easy, our experts at InnBlockchain will guide you through the process of acquiring a license in Australia and also help you satisfy compliance with applicable laws and regulations.