PRESS RELEASE: Australian Bitcoin Industry Body weighs in on policy change.
In a bid to safeguard consumers, the Treasury Department has released the “Regulating Digital Asset Platforms” proposal. The proposal rests on the assumption that the recent failures of cryptocurrency platforms resulted from unregulated intermediaries. The Australian Bitcoin Industry Body (ABIB) has expressed concern regarding this assumption, arguing that it does not effectively address the scams and fraud plaguing the digital asset sector. ABIB acknowledges the importance of ongoing discussions about consumer protection but maintains that the consistent and rigorous application of the current regulatory framework is sufficient to achieve the proposed policy’s goals.
Over the past year, the collapse of several major cryptocurrency exchanges has sent shockwaves throughout the digital asset landscape and global financial markets. Notably, the FTX exchange’s downfall left over 50,000 Australian customers without access to their funds. Public court documents from the FTX trial allege that this collapse was due to illicit activities, including record falsification, insider trading, and the misappropriation of customer funds to repay FTX loans – all of which contravene existing regulations. ABIB underscores that high-risk trading, staking, and yield platforms pose a substantial risk to consumers and contends, however, that the risk can be mitigated by adhering to the current regulatory framework. The organization warns that introducing additional compliance measures will only burden law-abiding actors in the industry, without addressing the root causes of the problem.
ABIB is steadfast in support of Bitcoin-only companies and expresses concerns that excessive industry regulation may adversely impact Australian businesses and drive innovation to foreign jurisdictions. The global nature of digital asset trading coupled with the ease with which developers can replicate Bitcoin’s code to create tokens has led to a proliferation of scams and fraudulent schemes. Platforms that facilitate the trade of altcoins are exposing their customers to substantial risks. It is crucial to understand that Bitcoin operates uniquely from other cryptocurrencies, as it is not profit-oriented and lacks a central governing authority, foundation, or marketing team. ABIB emphasizes that distinguishing Bitcoin from other digital assets is of paramount importance when formulating regulatory measures.
Additional licensing requirements: Within the proposal, there is a call for more stringent licensing requirements to be imposed upon all exchanges and custodians. ABIB argues that by simply encouraging adherence to existing ASIC standards within the current framework’s definition of a financial product, an immediate reduction in consumer risk could be achieved without extensive policy reform. “Bitcoin-only businesses tend to be smaller compared to their crypto industry competition, which makes it impossible for them to meet the high capital requirements of the Australian Financial Services Licence,” Chairman of ABIB Ethan Timor said. “Bitcoin is not a financial product and as such exchanges that are bitcoin-only can meet current regulatory requirements and provide low-risk options for customers to access Bitcoin”.
Minimum net total assets: The proposal introduces a standardized net total assets requirement for all custodians, irrespective of transaction volume, customer base, or funds under custody. Critics expressed concerns that this approach could stifle innovation and prompt smaller platforms to seek more accommodating jurisdictions, thereby limiting consumer choices. “Approval of the proposal in its current form would be detrimental to the Australian Bitcoin Industry, limiting Australians to crypto platforms that actively promote dubious cryptocurrencies and other high-risk activities, such as staking,” Ethan warned. Instead, ABIB advocates for a proportional regulatory response and a risk-based assessment approach. This approach would continue to foster the growth of new and smaller platforms, thereby expanding consumer choice while upholding consumer protection.
Enhanced regulatory oversight: The reform calls for extended authority for regulators to supervise and enforce compliance. It’s important to note that fraudulent activities and misinformation committed by unscrupulous entities in the cryptocurrency sector are already illegal under the existing framework. Industry leaders and advocates acknowledge the necessity of protective measures but are apprehensive that excessive regulations might impede industry growth. They argue that making it more challenging for compliant entities to adhere to the regulations does little to address the actions of those causing harm to consumers in the sector.
“To date all bad actors in the sector have been within the crypto space,” said Ethan, Chairman of ABIB. “Our Bitcoin-only members prioritise integrity over greed and simply don’t open their customers up to potential scams”.
Asset holding as the regulatory anchor point: Critics contend that the focus on asset holding as the regulatory anchor point falls short of addressing the pervasive issue of scams and fraud within the digital asset realm. They emphasize that making compliance more onerous for entities operating within the bounds of the law does not effectively address the actions of those detrimental to consumer interests in the sector.
“We believe the proposal as it is currently written contradicts the goal of preventing customer harm,” Ethan said. “We urge the Australian Government to engage in a meaningful dialogue with us and hopefully recognise Bitcoin’s unique status, as other countries already do”.
The ABIB is optimistic that a constructive dialogue between the industry and regulators can lead to policies that strike the right balance between protecting consumers and fostering innovation. They invite the government, media, and the public to visit their website at bitcoinindustrybody.org.au or contact them at [email protected] for further information and collaboration.
