Australian Legislators to Regulate Digital Currency Exchanges via New Bill

A parliament committee updated an AML/CFT bill with revisions that now include bitcoin exchanges under Australian legislation.

Authorities in Australia have made progress encompassing bitcoin and cryptocurrencies into existing regulation. A parliament committee updated an AML/CFT bill with revisions that now include bitcoin exchanges under Australian legislation. The change marks the first time digital currency operators form part of Australian laws.

The Legal and Constitutional Affairs Legislation committee published the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 [Provisions] (pdf) on October 12. The committee has been working on AML/CFT laws as part of Australia's broader reforms.

Chapter 2 of the committee's report states

"The bill seeks to introduce a new designated service and register in order to regulate digital currency exchange, to be introduced within six months of the bill's commencement."

Australia's existing AML/CFT bill is outdated, only capturing e-currencies that are backed by physical assets. So an update is necessary to reflect technological changes achieved by Bitcoin and digital currencies. 

The Bill goes on to read:

"the current regulatory regime under the AML/CTF Act was designed in 2006 and applies only to an 'e-currency,' which is 'backed by a physical thing. It excludes convertible digital currencies, such as Bitcoin, which are backed by a cryptographic algorithm'"

As part of its recommendations, the bill proposes that digital currencies and exchange providers should fall under the purview of the AML/CFT Act and regulations. If passed, the Australian Transactions and Reporting Analysis Centre (AUSTRAC) would oversee digital currency activity as Australia's financial intelligence authority. Additionally, the bill would grant power to the CEO of AUSTRAC to create rules to build on the narrow scope of the definition of ‘digital currency' as a means to ‘future proof' the Act.

Notably, a section on strict liability offenses introduced civil penalties for persons providing digital currency exchange services without formal registration.

Living room of Satoshi, an Australian company that lets users pay Australian bills with bitcoin, raised concern over low-value payments. The financial technology firm has handled over $5 million in household bills since 2014. In their opinion, the AML/CFT regulations would hinder retail digital currency payments below $1000. Instead, the company suggested an exemption for low-value payments.

Just like other countries such as Gibraltar, Malta, and Mauritius, Australia is keen to seal its reputation as a global financial technology center. Last month, Australia's government introduced regulation that scraped a double taxation on digital currencies. The new law announced at a Budget hearing in July, took effect retrospectively.

The Legislation Committee recommended that the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 [Provisions] Bill be passed. Regulation of digital currency exchanges is set to kick in within six months upon passing of the bill.