Blockchain and Cryptocurrency Regulations in Australia

The landscape surrounding blockchain technology and cryptocurrency regulations in Australia is evolving rapidly. Allied Legal's Commercial Lawyers can assist you in navigating the regulatory maze surrounding cryptocurrency-based businesses.

The Australian Securities and Investments Commission (ASIC), Australian Transaction Reports and Analysis Centre (AUSTRAC), and the Australian Taxation Office (ATO) are the primary regulatory bodies overseeing the cryptocurrency industry.

Connect with Allied Legal's Commercial Lawyers on 03 8691 3111 or drop us an email at hello@alliedlegal.com.au to find out more about the requirements around your Fintech business.

Blockchain and Distributed Ledger Technologies (DLT) in Australia

As of the publication date of this blog, there are no specific legislative regulations addressing blockchain or other distributed ledger technologies in Australia. However, it's important to note that Australian law applies to the particular industry in which blockchain technology is utilised. For example, the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) are relevant for financial services.

Current Legal Landscape for Cryptocurrency

Unless an exemption applies, entities engaged in financial services in Australia must hold an Australian Financial Services Licence (AFS Licence). Any entity providing financial services related to crypto assets classified as financial products must comply with AFS Licence requirements, including associated compliance and disclosure obligations.

The definitions of "financial product" and "financial service" under the Corporations Act are broad, encompassing various activities related to blockchain or cryptocurrency businesses. Therefore, obtaining an AFS Licence is necessary for providing financial services involving financial products.

Depending on the involvement with crypto assets, specific regulations apply to different participants:

1. Issuers of Crypto-Assets: Entities issuing crypto-assets categorised as financial products must hold an AFS Licence.
2. Crypto-Asset Intermediaries: Providing advice, dealing, insurance, or other intermediary services for crypto-assets classified as financial products requires compliance with Australian laws, including holding an AFS Licence.
3. Miners and Transaction Processors: While mining cryptocurrencies is not prohibited in Australia, if you are participating in the clearing and settlement process for tokens classified as financial products, you may require an AFS Licence.
4. Crypto-Asset Exchange and Trading Platforms: Operating a market for crypto assets categorised as financial products requires compliance with Australian laws, including obtaining an AFS Licence.
5. Crypto-Asset Investment Products: Offering investment products providing exposure to crypto-assets falls under financial product regulations and will require an AFS Licence.
6. Crypto-Asset Payment and Merchant Service Providers: Payment services involving "non-cash payment facilities" require an AFS Licence.
7. Wallet Providers and Custody Service Providers: If tokens stored qualify as "financial products," appropriate custodial and depository AFS Licence authorisations are required.

The ATO considers cryptocurrencies as taxable assets, mandating individuals and businesses involved in cryptocurrency trading to maintain transaction records for capital gains tax purposes. Additionally, other Australian regulatory regimes may apply to the cryptocurrency sector, including the Anti-Money Laundering/Counter-Terrorism Financing Act 2006 (Cth), the National Consumer Credit Protection Act 2009 (Cth) (e.g., if you are providing crypto lending services), and the Privacy Act 1988 (Cth).

Enhanced Regulatory Sandbox

ASIC Innovation Hub provides fintech licensing exemptions, allowing businesses to test certain financial services, products, and credit activities without holding an AFSL or Australian credit licence for up to 24 months. However, strict eligibility requirements, limitations on the number of clients serviced, and caps on provided financial products or services may apply. Allied Legal can provide you with initial guidance if you wish to apply for the enhanced regulatory sandbox.

Contact Allied Legal's Commercial Lawyers today

Allied Legal provides expert guidance on navigating the ever-evolving landscape of blockchain and cryptocurrency regulations. Our team stays at the forefront of legal developments, ensuring that you receive comprehensive advice tailored to your needs. Please reach out to Allied Legal’s commercial lawyers should you require assistance with AFS licensing.  

Contact Allied Legal today at 03 8691 3111 or drop us an email at hello@alliedlegal.com.au for more information or should you wish to discuss your business needs.

^{*The insights presented in this article authored by Russell Dominic, Lawyer at Allied Legal}