Internal reports uncover Australia's possible schedule for cryptocurrency regulation

Internal documents from the Australian Treasury suggest that the introduction of cryptocurrency regulation in the country may take at least a year to materialize.

According to internal documents from the Australian government, the implementation of cryptocurrency legislation may be postponed beyond 2024, as the government intends to thoroughly assess the industry before making any regulatory moves.

The documents, obtained by The Australian Financial Review under freedom of information laws, reportedly reveal that the government aims to release consultation papers in the second quarter of 2023 and will hold stakeholder roundtables on crypto licensing and custody in the third quarter.

The industry has been waiting to see the next steps of the Australian Labor government’s token mapping exercise, which was announced three months after it came into power last year, with submissions closed on March 3.

The internal documents indicate that final recommendations for cabinet consideration are unlikely to be submitted until the end of the year, potentially extending the wait for cryptocurrency regulation even further into 2024 and beyond.One report from the Treasury Department also acknowledges that the prolonged timeline for legislation may cause frustration among cryptocurrency businesses and consumer organizations.

“Treasury expects some stakeholders to be disappointed with the perceived delay in implementing a licensing regime,” according to a brief from Australian Treasurer Jim Chalmers, seen by AFR.“For example, consumer groups seeking immediate protections and businesses seeking regulatory legitimacy.”

However, the Treasury believes that in the wake of FTX’s collapse, the demand for cryptocurrencies has “weakened significantly,” which could give it more time to hash out regulations.

"Treasury considers these concerns are somewhat mitigated by the current market conditions resulting in less consumer demand for crypto assets; and the need to complete the token mapping exercise to provide clarity on how any new licensing framework would operate in practice."

The government has also revealed through the internal documents the creation of a specialized "cryptocurrency policy unit" within the Treasury Department.

During a meeting with the Treasury in November, the cryptocurrency policy unit reportedly raised the possibility of implementing licensing requirements for cryptocurrency businesses, such as "fit and proper person" assessments, capital requirements, and obligations to report any malicious actors or scams in the industry. The unit also emphasized the importance of enhancing consumer protections.

Last year, a survey from Australian crypto exchange Swyftx revealed in September that approximately one million Australians planned to purchase cryptocurrency for the first time over the next 12 months, bringing total crypto ownership in the country to over five million.