ASIC chairman warns new crypto rules need more time

“The most comprehensive regulatory framework in the world would be incomplete without strong enforcement to support it,” he said.

Leaders of the crypto industry have been badly battered by the implosion of FTX and failure of other players like Celsius and Luna, and said regulation is necessary. Mr Jones said the government wants to support innovation in the space at the same time as it lifts consumer protections.

Chloe White, managing director of Genesis Block, said the plans “may help Australia to catch up to the way other countries have been for some time” and it was appropriate to focus regulation on service providers rather than tokens themselves.

Mr Carnegie, founder of MHC Digital Group, said regulation would help to legitimise the crypto market. “The idea that the only people who could give you digital asset advice were unregulated people completely outside the financial system was a recipe for catastrophe. That’s what happened,” he said. “What the government has proposed today is clearly a step forward.”

Coinbase CEO Brian Armstrong said the US regulatory approach, the US Securities Exchange Commission has sued Coinbase for failing to register as a securities exchange, is damaging the industry and forcing crypto start-ups offshore.

“That’s the benefit of countries like Australia taking a more proactive approach, to engage in conversations around rule making and things like that,” he said.

Mr Jones said the new regulations could trigger consolidation of around 400 crypto exchanges currently registered with AUSTRAC. Many of these will not to be able to meet the requirements for an AFSL.

Mr Longo said ASIC and the government should be able to land a regulatory framework by early next year, “but it has to be the right one that’s fit for purpose for Australian conditions”.

“People need to be a little bit patient that all the things they might want to be able to do and may not be able to do in order that the interests of consumers and investors are protected,” he said.

Loretta Joseph, who is writing crypto laws for Commonwealth countries, said the government would need to be careful when drafting the laws to incorporate hundreds of recommendations from global anti-money-laundering regulators when regulating digital assets. “We need to be very, very careful when we look in the detail and definitions,” she said.

Commonwealth Bank managing director of blockchain and digital assets Sophie Gilder said getting clarity from regulators was crucial before banks rolled innovations in the market based on crypto technology.

“No one wants to go out with a product which is not okay, and regulation by enforcement, like we’ve seen in the States, is definitely not a path we want to go down,” she said.

“I think there’s some additional scope to work out how we can collaborate and get to clarity before products are issued, that is better for customer protection, and it’s certainly a better and more fruitful allocation of resources.”

Robbie Ferguson, co-founder of web3 gaming start-up Immutable, said Australia hasn’t lost the race to attract frontier technologists. Immutable sells its technology platform to video game studios wanting to develop games where the in-game assets belong to the players and are tradable.

“Over the next couple of years, Australia has an opportunity to become the global de facto place that entrepreneurs, capital and investments can flow thanks to good regulation,” Mr Ferguson said.

“But there’s clearly a bit of nervousness about this regulatory shift, and different markets having different views on it.”