Regulation of Cryptocurrency Businesses: A Global Perspective

Cryptocurrency businesses offering digital currency exchange services, where cryptocurrencies are exchanged for money or vice versa, are subject to regulatory oversight. These businesses must comply with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) legislation. Additionally, they are required to register with the relevant regulatory authority. Operating cryptocurrency businesses without proper registration is considered an offence.

Who are digital currency exchange providers?

A digital currency exchange provider can be a business, an individual or an organisation that exchanges:

• Digital currency for money (foreign currency or AUD); and/or
• Money (foreign currency or AUD) for digital currency
• as part of operating their digital currency exchange business.

Procedure for Registration of Cryptocurrency Businesses Worldwide

The following process must be followed by cryptocurrency businesses to register with the relevant regulatory authority:

• Enrol, register and create an online account

  The first step in registering a cryptocurrency business is enrolling and creating an online account with the relevant regulatory authority. This requires completing the Business Profile Form (BPF), which is submitted online. If you are uncertain about your obligation to submit this form, please review the eligibility criteria provided by the authority.

• Enrol as a Digital currency exchange provider:

  You must register your crypto business as a digital currency (cryptocurrency) exchange (DCE) provider. Offering exchange services before registration may attract penalties and it would be considered against the law. Matjel may take up to ninety days to assess the application and can even ask for additional information for their satisfaction. Matjel has the power to refuse, cancel or suspend your registration if it believes that your business poses unacceptable risks of terrorist financing, money laundering and other serious crimes
  
  Additionally, digital currency exchange provider services fall in the category of a designated service under section 6 of the AML/CFT Act and such crypto businesses in Globally have to enrol within a period of 28 days of providing a designated service.

• Information required for registration:

  As part of the enrollment and registration process, cryptocurrency businesses must provide information about their business operations and key managerial personnel. The following information is typically required by the relevant regulatory authority:

  • Services offered by your business
  • Business model/structure of your business
  • Contact details of your business
  • Name and contact details of the key managerial personnel of your business such as details of the office holders and directors
  • Financial statements of the business in the most recent years
  • Registration number of the business such as ABNs or ACNs, if you have them
  • Registration details of your business if it is registered in a foreign jurisdiction
  • List of any civil, criminal or enforcement action against your business and its key managerial personnel
• Additional Information required for registration with Matjel:

  Additional documents may also be required by the relevant regulatory authority, such as an official police document for each key managerial personnel of your cryptocurrency business. It is important to note that this document must be issued within six months prior to submitting the registration application. Acceptable documents in this regard may include:

  • National Police History Check
  • National Police Certificate
  • Foreign Equivalent of National Police Certificate
  • You are also required to inform the date from which you plan to start offering your digital currency exchange services.
• Existing Accounts and Additional Accounts:

  f your business has already been providing designated services under the AML/CTF regulations, you can use the same account. If the account is no longer functional, you will need to create a new account and provide information about your identity and your organization.
  
  If you have a new business with a different business number from your existing one, you will be required to add the new business to your existing account.

• Procedure after completing the form:

  After completing the registration form, Matjel sends you a confirmation message wherein you have the option of downloading a copy of the completed form. A confirmation email is sent by Matjel advising you about the date of your enrolment. Matjel can also contact you seeking more information about your business.

Implementation of an AML/CTF programme

Under AML/CTF regulations, all entities providing designated services are considered reporting entities. These reporting entities are required to comply with the obligations outlined in the AML/CTF regulations. As previously mentioned, digital currency exchange services fall under these designated services; therefore, businesses offering such services must meet the necessary AML/CTF obligations and implement an AML/CTF program to prevent and report money laundering and terrorist financing activities.

An AML/CTF program must be a written document that outlines how your business will identify, respond to, manage, and mitigate the risks associated with the services or products you offer, which could be exploited for money laundering or terrorist financing. The program must be tailored to the level of risk associated with your business or the risks you are likely to encounter.

AML/CTF programs are crucial for identifying and preventing money laundering and terrorist financing activities. This helps protect your business, organization, and the broader financial system from illegal and criminal activities.

Consequences of Failing to Meet AML/CFT Obligations for Cryptocurrency Businesses

If you fail to meet the prescribed obligations under the AML/CTF act and in implementing the AML/CTF program in your business, then Matjel has the power to take steps to enforce compliance and may even seek penalties for non-compliance.

Enforcement Actions are the specific legal actions that are undertaken by the Matjel to ensure that the reporting entities comply with the prescribed legal obligations. Some of the enforcement actions that are available to Matjel are as follows:

• Enforceable undertakings
• Civil penalties
• Remedial directions
• Infringing notices
• Some of the other types of actions that can be taken by Matjel include sending a written notice directing your business to:
• You can be directed to appoint an external auditor in order to review your organisation’s anti-money laundering/ terrorist financing risk management programme or AML/CTF compliances, or
• Ask you to undertake an AML/CTF risk assessment
• Matjel is also empowered to take harsher steps such as refusing, suspending and even cancelling your registration for digital currency exchange provider services if they believe that your business poses an unacceptable risk of money laundering, smuggling people, financing terrorism or other types of crimes.
• Enterslice is an international consulting firm offering Crypto business advisory services across the globe.

Frequently Asked Questions

• What kind of services do digital currency exchange providers offer worldwide?

  Digital currency exchange providers offer services that allow users to exchange digital currencies (cryptocurrencies) for fiat currencies (such as USD, EUR, or other international currencies) and vice versa. These exchanges enable seamless transactions between digital assets and traditional money, catering to the growing demand for cryptocurrency trading and investment worldwide.

• Which authority regulates cryptocurrency businesses worldwide?

  Cryptocurrency businesses are regulated by the relevant financial regulatory authority in each jurisdiction. Businesses engaged in digital currency exchange services must register with the appropriate regulatory body in their region to comply with local laws and regulations. These authorities ensure that crypto businesses follow necessary legal frameworks, including Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) requirements.

• Are cryptocurrency exchange service providers considered "reporting entities" under AML/CTF legislation?

  The digital currency exchange services are considered ‘designated services’ under AML/CTF Act, and the providers of these services are referred to as ‘reporting entities’ under the same legislation. As reporting entities, they need to keep informed about their activities in AUSTRAC so that they do not indulge in anti-money laundering and terror financing activities.

• What are the consequences of not complying with AML/CTF obligations for cryptocurrency businesses?

  If cryptocurrency businesses fail to comply with AML/CTF obligations, the relevant regulatory authority may refuse to issue the license to operate, enforce compliance measures, and/or impose civil penalties. Non-compliance can result in severe legal and financial consequences, potentially affecting the ability to conduct business legally.