13 June 2018

If you’re planning on offering crypto-currencies for sale or purchase on a digital currency exchange (also known as a crypto-currency exchange), you should consider seeking legal advice.

Australia has recently introduced a number of new legislative provisions to regulate the trade of digital currencies. The applicability of these laws will depend on numerous factors, such as the nature of the coins traded and the offerings of the digital currency exchange.

We have outlined some of the regulatory considerations below.

Will you need any licences to operate a digital currency exchange?

Previous public commentary from ASIC indicated that it did not generally consider digital currencies to be financial products in Australia. However, ASIC’s recent release of information sheet 225 (INFO 225) clearly demonstrates that ASIC is considering this issue more closely. Whether a digital coin is a financial product (the trading of which is regulated) will depend on the specific circumstances of each case.

In certain cases, the trading of digital currency by digital currency exchange platforms could amount to carrying on a financial services business (which requires an Australian Financial Services Licence), or the operation of a financial market (which requires an Australian Market Licence).

For further commentary on offering new digital coins under an ICO and the application of information statement 225, please read our legal alert ‘So, you’re thinking of undertaking an ICO?’.

Will your digital currency exchange need to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act)?

Yes – the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (Amendment Act) was enacted in December 2017 to extend the current regulatory regime to digital currency exchange providers in response to key money laundering and terrorism risks posed by the use of digital currency.

As of 3 April 2018, digital currency exchanges will be required to apply for registration with the anti money laundering agency – Australian Transaction Reports and Analysis Centre (AUSTRAC) – in order to operate in Australia. Under these reformed laws, the operation of digital currency exchange platforms will also be considered to be a provision of a ‘designated service’ and so a number of new reporting and compliance obligations will apply.

For further commentary on the introduction of the reformed AML/CTF Act, please read our legal alert ‘Digital currency exchange – quick guide to compliance with the Anti-Money Laundering and Counter Terrorism Financing Act’.

If you would like any assistance to better understand your legal obligations in relation to operating a digital currency exchange, please contact a member of our team.

Please note that this is a developing area of law and these legal considerations are by no means exhaustive.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.