Australia to revamp digital assets regulation to make them ‘safer for consumers’

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The Australian government has hinted that it will take an active approach toward virtual currency regulation in the country in the coming months to protect investors.

The new government stance was revealed in a statement from the Australian Treasury where it noted that it is “acting swiftly and methodically” to protect consumers from inherent risks in the sector. To this end, the Treasury highlights a multi-pronged approach toward regulation to craft an “exhaustive, bespoke taxonomy” for the industry.

The top of the line for the Australian government is to strengthen enforcement action against erring virtual currency service providers and other bad actors. The Treasury’s statement notes that citizens lost an astronomical $221 million in 2022 to digital asset fraudsters, amounting to a 162% spike from the figures of 2021.

To this end, the Australian Securities and Investments Commission (ASIC) has announced the increase of its virtual assets monitoring team while pledging to double legal action against offending service providers. Both the Australian Competition and Consumer Commission (ACCC) and the National Anti-Scams Centre are teaming up to crack down on the activities of digital currency fraudsters.

“Unsustainable business models used by some companies dealing in crypto assets have left consumers exposed,” the Treasury said. “The previous government dabbled in crypto policy but never took the time to future-proof our regulatory framework to protect consumers and guide this new and emerging class of assets.”

The Treasury added that it will be taking things up a notch in terms of investor protection, putting in place “a set of obligations and operational standards for crypto asset service providers.” Furthermore, a public consultation has been put in place by the Treasury to involve key stakeholders in its quest to police the industry.

The swinging pendulum

Australian regulators are faced with various options to choose from in regulating virtual currencies. Pundits point out that it appears the government is leaning towards treating the asset class as financial products, which could see the application of financial regulators to the sector.

They hinge their arguments on a two-decade-old financial system inquiry that recommends that “functionally-equivalent products should be treated equivalently.” The Financial Stability Board (FSB) also recommends the same method in its proposed virtual currency framework for member countries.

There are pressing concerns that applying financial regulation to the entire virtual currency industry could stifle innovation and growth in the space. However, preventing large-scale industry collapses like FTX might be a deal breaker for Australian regulators.

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