The Australian federal government may soon require cryptocurrency exchanges to hold a financial services license issued by the local financial regulator, the Australian Securities and Investment Commission (ASIC).

In the newly-unveiled “Regulating digital asset platforms” consultation paper, released on Oct. 16, the Australian Treasury said that the new regulatory framework aims to address consumer harms while still supporting innovation in the digital asset sector.

The core theme of the new regulatory framework is that it aims to regulate cryptocurrency exchanges and service providers instead of individual cryptocurrencies or tokens themselves. Additionally, the consultation paper explained that it will regulate crypto exchanges under pre-existing financial services laws, instead of crafting new crypto-specific rules.

Jonathon Miller, the Director of Kraken Australia expressed his disappointment at the latest developments, saying that the consultation paper was essentially “shoehorning” crypto in existing financial services regulation.

“We’re behind our global peers when it comes to implementing a crypto framework, so I appreciate the need to have something in place locally to provide certainty to platforms like ours,” Miller said. “Our concern is that this approach creates ample opportunities for the regulation to ignore the nuances of the technology.”

“I’m hopeful that we can work collaboratively with the Government to make sure we don’t snuff out the benefits of future innovations in crypto that might fall outside the conventional ‘financial services’ box.

Liam Hennessey, partner at international law firm Clyde & Co said that while its clear that the Treasury is still “grappling” with all of the different types of tokens and services providers, it’s crucial to remember that all new proposals set out in the consultation paper are still only suggestions, and are not legally binding recommendations.

“Whatever the Treasury suggests, it is just that – a suggestion only. The Government is not bound to follow its recommendations, and there will be lobbying once the consultation paper comes out.”

Hennessy said that the consultation paper arguably doesn’t address the more pressing issues facing the crypto industry in Australia, like issues such as the recent slew of de-banking.

“Many licensed digital assets exchanges, both domestic and international, are struggling to find adequate banking arrangements,” said Hennessy.

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