The Australian government has announced its intention to regulate cryptocurrency exchanges under the existing Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). This move is part of a broader reform package to strengthen the country’s financial intelligence and regulatory capabilities, as well as to align with international standards and best practices.
According to the government’s consultation paper, the proposed amendments to the AML/CTF Act would require cryptocurrency exchanges to register with the Australian Transaction Reports and Analysis Centre (AUSTRAC), the country’s financial intelligence agency. They would also have to comply with customer due diligence, record-keeping, reporting, and program obligations, similar to other regulated entities such as banks and remittance providers.
The government argues that this approach would provide legal certainty and consumer protection for the cryptocurrency sector, while also addressing the risks of money laundering, terrorism financing, tax evasion, and cybercrime. It would also enable AUSTRAC to monitor and supervise the compliance of cryptocurrency exchanges, and to impose civil penalties or criminal sanctions for breaches of the law.
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The government acknowledges that the proposed regulation would impose additional costs and obligations on cryptocurrency exchanges but claims that these would be proportionate to the risks and benefits involved. It also notes that the regulation would not apply to other types of crypto-assets or activities, such as initial coin offerings (ICOs), decentralized exchanges, or peer-to-peer transactions.
The consultation paper is open for public feedback until November 20, 2023. The government intends to introduce the legislation to Parliament in early 2024, subject to the outcome of the consultation process. If passed, the regulation would come into effect six months after the enactment of the law.
In the United States, a new bill introduced by US Congressman Don Beyer aims to regulate the cryptocurrency industry and impose stricter reporting requirements for off-chain transactions. The bill, titled the Digital Asset Market Structure and Investor Protection Act, would create a statutory definition of digital assets and digital asset securities, and establish a framework for their regulation by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
One of the most controversial provisions of the bill is the requirement for any person who engages in a transaction involving a digital asset that is not recorded on a distributed ledger or platform to report such transaction to a registered digital asset trade repository within 24 hours. The bill defines a digital asset trade repository as an entity that collects and maintains information on digital asset transactions and makes it available to regulators and the public.
The bill also requires any person who transfers more than $10,000 worth of digital assets in a single transaction or in aggregate over a one-year period to report such transfers to the Internal Revenue Service (IRS) and the Financial Crimes Enforcement Network (FinCEN). The bill would also subject digital assets to anti-money laundering and countering the financing of terrorism rules and impose sanctions on foreign persons who use digital assets to evade US sanctions or engage in illicit activities.
The bill’s sponsor, Congressman Beyer, said in a press release that the bill “would protect consumers, promote innovation, and ensure that America remains a leader in the digital asset space.” He added that “digital assets and blockchain technology hold great promise, but it is clear that the market needs a legal framework to prevent abuse and ensure that investors are protected.”
However, the bill has also faced criticism from some industry experts and advocates, who argue that it would stifle innovation, impose excessive compliance costs, and infringe on the privacy and autonomy of crypto users. They claim that the bill would create a centralized database of all off-chain crypto transactions, which could be vulnerable to hacking, surveillance, or misuse by authorities.
They also contend that the bill would impose unrealistic reporting requirements that would be impossible to comply with for many types of off-chain transactions, such as peer-to-peer transfers, atomic swaps, or transactions involving privacy coins or decentralized exchanges.
Some critics have also questioned the need for such a sweeping regulation of the crypto industry, given that existing laws already cover most aspects of digital asset transactions. They point out that the SEC and the CFTC already have jurisdiction over digital asset securities and derivatives, respectively, and that FinCEN already requires crypto exchanges and custodians to register as money services businesses and comply with anti-money laundering rules. They also note that the IRS already treats digital assets as property for tax purposes, and that crypto users already have to report their gains and losses on their tax returns.
The bill is currently pending before the House Committee on Financial Services, where it will likely face further scrutiny and debate. It is unclear whether it will gain enough support to pass the House, let alone the Senate, where it would need 60 votes to overcome a filibuster. The bill’s fate may also depend on the Biden administration’s stance on crypto regulation, which has yet to be fully articulated.