Cryptocurrency exchanges in Australia will now have to comply with a new set of regulations as the government looks to stamp out the use of the technology in criminal activity.
On 3 April, Australia’s financial intelligence agency AUSTRAC made live new anti-money laundering (AML) and counter-terrorism financing laws (CTF) which require digital currency exchanges operating in Australia to register with AUSTRAC and meet a set of obligations.
National Manager, Strategic Intelligence and Policy at AUSTRAC, Brad Brown, said the laws were not just to stamp out crime, but to also help regulate the industry.
“The desire for regulation from industry itself, and equally government, was about responding to risk and also creating a greater level of legitimacy,” he told Information Age.
“Often people talk about regulation being a burden, but the sector has really sought this regulation to legitimise business.”
While they have garnered mainstream attention in recent times, cryptocurrencies have previously been used on the ‘dark web’ -- Silk Road being the most notable example -- where Bitcoin was used for the buying and selling of illicit drugs between 2011 and 2013.
Brown highlighted that illegal use of the blockchain technology had now extended.
“There are a number of crime types where we have seen the involvement of cryptocurrencies,” he said.
“Cybercrime, business compromise, ransomware and the requirements to make payments.”
The reforms come after a 2016 review of AML/CTF legislation which recommended industry obligations be extended to digital currency exchanges.
Crypto exchanges will now have to adopt and maintain an AML/CTF program and be able to identify and verify their customers.
Additionally, all ‘suspicious matters’ and any transactions involving $10,000 or more in cash must be reported to AUSTRAC.
“They [digital currency exchanges] have to identify, manage and mitigate the risk their business may be misused for money-laundering or terrorism financing,” Brown said.
“The obligations for digital currency exchanges are not dissimilar to the obligations that operate for financial institutions and other entities that are regulated by AUSTRAC.”
National Currency Exchange (NCX) was launched in January this year after it raised $750,000 in private funding.
It has recently implemented a compliance program and has registered with AUSTRAC.
Compliance Manager of NCX, Nastassja Hopkins, welomed the reforms and echoed Brown's comments regarding industry desire for regulation.
“We believe that these regulations are a good thing as it increases the reliability of the industry as well as decreasing the level of risk associated with trading cryptocurrency,” she said
“We feel that these regulations alongside the Best Practice Standards being set by organisations such as ADCA will bring in an industry standard that can be applied globally to further reinforce confidence in this sector and use of the technology and currency.”