Crypto Exchanges To Be Regulated Under the Existing AFSL Regimen

crypto exchanges to be regulated under the existing afsl regimen

The Government has said that Crypto exchanges will be regulated under the existing AFSL regimen.

Exchanges holding $5 million in aggregate, or more than $1500 for any one individual - all exchanges - will have to apply for and be granted a financial services licence.

The key elements of compliance will be similar to other financial services entities, including;

  • Organisational competence requirements, to ensure adequate expertise, and this will include having Responsible Managers

  • Acting honestly, efficiently and fairly in relation to the provision of services

  • Complying with the Design Distribution Obligations, including issuing and maintaining a Target Market Determination - TMD

  • Becoming AFCA members

  • Meet capital requirements

  • Meet cash needs requirements

  • Lodge audited accounts with ASIC annually

  • Have an audit of their license compliance annually

There are going to be additional rules around custody - the key risk for exchanges - and also there will be obligations, including requiring standard form contracts, introducing standards for custody software, and holding and transacting tokens.

The government will consult until December 1 on its plans and will release an exposure draft of its proposed legislation next year. Exchanges will have 12 months to transition to the new regime.

LNP Audit and Assurance have extensive expertise in AFSL, and Crypto exchange audits, AFCA reviews, AML reviews, and custody and compliance generally. Please contact us.

Tony Rose