Australian regulators are taking steps to tighten regulations on cryptocurrency exchanges by requiring them to obtain financial services licenses. The move comes as the Australian Securities and Investments Commission (ASIC) prepares to extend licensing requirements beyond those related to digital currency exchanges, as reported by The Australian Financial Review (AFR).

ASIC commissioner Alan Kirkland highlighted the need for these new requirements at the AFR Crypto and Digital Assets summit in Sydney on Sept. 23. Kirkland emphasized that the regulator believes the Corporations Act already covers most major crypto assets like Bitcoin (BTC) and Ether (ETH), necessitating the need for stricter regulations.

The ASIC is set to update the Corporations Act’s Information Sheet 225 to provide more clarity on how specific crypto tokens and products should be treated from a regulatory perspective. Kirkland stated that a significant number of crypto-asset firms in the Australian market are likely to require a license under the current law, emphasizing the importance of consumer protection and market integrity.

Senator Andrew Bragg criticized Australian regulators for their lack of proactive approach to regulating the crypto market, stating that Australia has fallen behind in the crypto industry. He pointed out that the government had abandoned a regulatory framework for crypto asset secondary service providers (CASSP) and failed to prioritize crypto legislation, stifling innovation in the country.

Despite efforts to introduce regulatory recommendations for stablecoins, licensing of exchanges, and custody requirements through a draft bill in 2023, Australia’s Committee on Economics Legislation recommended against passing Senator Bragg’s crypto regulation bill in early September 2024. This decision reflects the ongoing debate and challenges surrounding crypto regulation in Australia.

As the ASIC prepares to release updated guidance in the coming months, the crypto industry in Australia faces uncertainty and potential changes in the regulatory landscape. The push for financial services licenses for crypto firms signals a shift towards stricter oversight and compliance measures to protect consumers and ensure market integrity in the evolving digital asset space.