The introduction of new cryptocurrency regulations by the Australian government is poised to considerably shrink the number of registered crypto exchanges in the country, reports the AFR.
The recently announced rules, disclosed at The Australian Financial Review Crypto Summit, require crypto exchanges to secure an Australian Financial Services Licence (AFSL) from the Australian Securities and Investments Commission (ASIC).
Assistant treasurer and minister for financial services Stephen Jones affirmed the changes, stating they aim to mitigate fraud and scams prevalent in the industry.
Out of 400 exchanges registered by the Australian Transaction Reports and Analysis Centre (AUSTRAC), a significant number are expected to struggle with compliance.
Michael Bacina, director at Blockchain Australia, opined that the sector might be "left with 10 or 20" platforms.
Follows FTX collapse
To be eligible for an AFSL, exchanges must hold more than A$5 million in aggregate or more than A$1,500 per individual customer on their platform.
Ryan McCall, co-founder and CEO of ZeroCap, corroborated the impending consolidation within the industry, saying: "We’ve already been approached by a smaller player asking if we wanted to buy them."
This development comes on the heels of the collapse of international crypto exchanges like FTX and the failure of platforms like Celsius and Luna.
In parliament next year
ASIC chairman Joe Longo cautioned that the enforcement of new standards will take time.
The guidelines also cover crypto-specific activities such as staking and tokenisation.
While the new legislation does not necessitate that crypto assets remain in Australia, the move has prompted discussions on customer asset security.
Adrian Przleozny, CEO of Independent Reserve, advocated for rules ensuring assets are kept onshore to protect Australian customers from foreign bankruptcy laws.
The legislation is set to be introduced in parliament next year, prior to exchanges initiating their AFSL applications.