i INTRODUCTION TO THE LEGAL AND REGULATORY FRAMEWORK

i Overview

Blockchain related-activities are regulated in Australia under a range of laws. Like many other jurisdictions, Australian regulators are taking a keen interest in blockchain technologies, and have been reasonably active in seeking to understand how emerging developments in this space will impact existing regulatory frameworks. To date, the regulators have mainly sought to address developments in the blockchain space through a combination of regulatory guidance and targeted, incremental changes in the legal and regulatory landscape to address emerging challenges.

We expect that the legal and regulatory landscape in Australia will continue to evolve over the next few years as blockchain-use cases continue to proliferate, and policy makers and regulators seek to establish more sophisticated approaches to addressing the impact of blockchains across a range of areas.

In this chapter, we focus on the legal and regulatory framework that impacts virtual currencies, token generation events (TGEs) such as initial coin offerings (ICOs) and security token offerings (STOs), and virtual currency exchanges.

ii Regulation

The Australian Securities and Investments Commission (ASIC) is Australia's corporate regulator, with broad powers under the Corporations Act in relation to the provision of financial products and a range of fundraising activities that may impact TGEs.2

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia's principal anti-money laundering and counter-terrorism financing (AML/CTF) regulator. Following amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) on 3 April 2018, virtual currency exchanges are now subject to mandatory registration and reporting obligations.

Self-regulation

Australia's regulatory environment is also supported by industry self-regulation led by the Australian Digital Commerce Association (ADCA), the industry body representing businesses using blockchain technology. In February 2016, the ADCA published the voluntary Digital Currency Industry Code of Conduct (DCI Code).

iii Taxation

The Australian Taxation Office (ATO) is the principal Australian revenue collection agency responsible for administering Australia's federal taxation system. The ATO has issued guidance regarding how virtual currency and ICO token events, including acquisitions and disposals, are treated from a taxation perspective.

iv Consumer protection

Australian law prohibits various forms of misleading and deceptive conduct. In May 2018, ASIC announced a focus on investigating and prosecuting TGE issuers, sponsors or advisers engaging in misleading and deceptive conduct in breach of the Australian Consumer Law (ACL).3

II SECURITIES AND INVESTMENT LAWS

The Corporations Act, Australia's main securities legislation, operates on a technology-neutral basis and has not been changed to specifically accommodate (or prohibit) virtual currencies and TGEs.4 ASIC's approach has centred around providing guidance on how the Corporations Act could potentially apply to virtual currencies and TGEs.5

As each virtual currency or TGE is potentially different, the regulatory treatment will depend on how the relevant offering is structured and the bundle of rights attached to it. The fact that a token may be self-described as a virtual currency or utility token will not necessarily mean it falls outside of regulation under the Corporations Act (e.g., as a financial product) or otherwise not be subject to its provisions (e.g., in relation to misleading and deceptive conduct).

Chapters 6D and 7 of the Corporations Act, which regulate fundraising and financial services markets respectively, are the main aspects of the Corporations Act that could potentially apply to virtual currencies and TGEs.

i Regulation as a financial product

Whether a virtual currency or TGE is caught by Chapter 7 turns principally on whether it is a financial product.6 The following are examples of a virtual currency or TGE that may be a financial product:

  1. where it has the characteristics of a security, such as linking to an underlying asset granting rights to voting, dividends or distribution of capital in a body corporate;
  2. where it may be used as a payment method that makes it a non-cash payment facility;
  3. where virtual currency exchange transactions do not settle immediately, or the price or a requirement to provide consideration is derived from another asset or index, in a way that makes it a derivative;
  4. where it allows people to provide money in exchange for tokens and pools contributions to provide financial benefits to token holders, making it a managed investment scheme; or
  5. where entities that are currently licensed to provide financial services or a financial market in respect of a financial product expand their offering to incorporate a virtual currency or TGE.

ii Regulation of managed investment schemes

A managed investment scheme (MIS), also known as pooled or collective investments, is a type of Australian investment scheme where pooled contributions produce financial benefits for scheme members.7 An MIS must be registered, and cannot be operated unless it is registered, if it meets certain criteria (e.g., it has more than 20 members).8

Rights granted to token holders described in white papers and offer documents can potentially constitute an MIS. This is particularly the case where issuers seek to tokenise certain assets or create exposure to a certain asset class or trading activity, such as a venture capital (VC) fund or hedge fund, through issuing a bundle of rights using a blockchain.

In May 2018, Neds, an Australian wagering and betting start-up company, proposed to issue NedsCoins, which could be used to place bets on the Neds platform and entitled token holders to receive dividends of 0.25 per cent of the company's quarterly turnover. ASIC investigated the offer and determined that, in addition to potentially misleading statements in the white paper, the offer was an unregulated MIS. Neds, along with other issuers, subsequently halted their ICO and indicated they would make structural changes.9

iii Virtual currency and non-cash payment facilities

A non-cash payment (NCP) is a payment made without physically delivering Australian or foreign currency, made through an NCP facility.10 In May 2018, ASIC stated that a virtual currency or ICO token itself is unlikely to be an NCP facility.11 However, a virtual currency or TGE may be an NCP facility in certain circumstances, unless an existing exemption applies or ASIC grants relief from the operation of these provisions.12

iv Fundraising provisions

If a virtual currency or TGE gives token holders rights that are equivalent to a security (e.g., a share) then the disclosure requirements in Chapter 6D will apply to such token offers. For example, tokens giving token holders the right to vote in decisions of the issuer and receive dividends proportionate to their token holdings. Exemption from disclosure is available in certain circumstances, such as for small-scale offerings, or offers to sophisticated investors or through financial services licensees.13

v Crowdfunding

In September 2017, the Corporations Act was amended to allow crowd-sourced funding (CSF) as a financial service regulated by Part 6D.3A of the Corporations Act. These provisions allow qualifying companies to obtain crowd-sourced investment through a CSF intermediary platform.14 The CSF regime operates as an alternative fundraising regime.

iii BANKING AND MONEY TRANSMISSION

Virtual currencies and crypto assets are not currently regulated in Australia as legal tender or money.

The Reserve Bank of Australia (RBA), Australia's principal payments system regulator, has stated that it does not consider virtual currencies to be part of the Australian payments system because:15

  1. they are not widely accepted or used as a payment method;
  2. they are not an effective store of value due to large fluctuations and strong speculative influences; and
  3. they are not commonly used as a unit of account: goods and services in Australia continue to be priced overwhelmingly in Australian dollars.

At the time of writing, linkages in Australia between virtual currencies and the broader financial system remain limited,16 underlined by financial institutions taking steps to actively avoid dealing with virtual currencies and intermediaries.17 The RBA consequently has limited concerns regarding virtual currencies with respect to competition, efficiency or risk to the financial system warranting urgent regulatory intervention, even in the event of token valuation losses.18

The RBA has indicated that regulatory intervention can be expected once virtual currencies mature beyond 'speculative mania' to become an efficient or widely used payment method to mitigate any payments system stability risks.19

iv ANTI-MONEY LAUNDERING

The concern that virtual currencies may be used by criminals seeking a low-detection risk method to transfer funds has played a prominent role in shaping the initial response of Australia's lawmakers to the growth of virtual currencies.20

This has recently culminated in strengthened AML/CTF measures to safeguard the ability of regulators such as AUSTRAC and law enforcement agencies to detect criminals who would otherwise desire to manipulate the financial sector to obfuscate illegal transactions and funding sources. As per the approach adopted in other advanced economies, the Australian government has sought to focus regulation on the primary entry and exit points between the payment systems supporting virtual currencies and fiat currencies.

i Application to virtual currency exchanges

The government has amended the AML/CTF Act with effect from 3 April 201821 to include digital currency exchange services and other digital currency-related services as a designated service regulated by the AML/CTF Act; and establish mandatory registration and reporting obligations on registrable digital currency exchange operators.

The AML/CTF Act will only apply to entities that provide services related to digital currencies, defined as a digital representation of value that:

  1. is not issued by or under the authority of a government;
  2. functions as a medium of exchange, a store of economic value or a unit of account;
  3. is interchangeable with fiat money, and may be used as consideration for the supply of goods or services; and
  4. is generally available to members of the public without any restriction on its use as a form of consideration.22

ii Compliance obligations

The AML/CTF Act applies to reporting entities that provide designated services within Australia or that otherwise have a pre-defined link to Australia.23 Reporting entities must properly identify customers before providing exchange services, meet reporting and record-keeping obligations and have an AML/CTF compliance programme.24

A reporting entity cannot provide a designated service to a customer if it does not adopt and maintain an AML/CTF compliance programme.25 Reporting obligations require digital currency exchanges to submit to regular reporting to AUSTRAC regarding suspicious transactions or transactions above a threshold amount.26 These measures acknowledge the increasing role played by digital currency exchanges to assist the intelligence-gathering efforts of regulatory and law enforcement agencies.

v REGULATION OF EXCHANGES

Digital currency exchanges (DCEs) are the main touch point between virtual currencies and traditional fiat-based payment systems. There are a growing number of DCE service providers operating in Australia, in addition to exchanges located outside Australia offering markets in Australian dollars.

The regulatory regimes impacting DCE operators in Australia include mandatory registration, reporting and compliance obligations under the AML/CTF Act; and potential requirements to obtain and maintain a licence to offer a financial service or financial market under the Corporations Act, depending on whether the DCE operator is offering a financial product.

i AML/CTF requirements

A DCE operator that is a reporting entity providing a designated service must comply with the reporting entity obligations under the AML/CTF Act: see Section IV.

All registrable DCE operators must enrol and register with AUSTRAC on the Digital Currency Exchange Register (DCE Register) before providing DCE services, and must renew their registration every three years.27 While the DCE Register cannot be publicly searched, several Australian DCE operators have announced their successful registration with AUSTRAC to demonstrate their regulatory compliance to the market.

ii Licensing requirements

An entity must obtain a licence to authorise any financial services or financial markets offered or provided in relation to financial products. ASIC has indicated the following virtual currency exchange-related activities are not a financial product, financial service or a financial market requiring a licence:

  1. the immediate exchange and settlement of virtual currency transactions and operating a virtual currency exchange;
  2. software that facilitates virtual currency transfers between wallets;
  3. virtual currency automated teller machines (ATMs); and
  4. escrow facilities supporting virtual currency exchanges.

At the time of writing, the major Australian DCE operators have not taken steps to obtain an Australian financial services licence for their virtual currency exchange activities. However, DCE operators may need to be licensed for other activities in respect of a financial product. For example, CoinJar, in addition to providing DCE services, provides CoinJar Swipe, which is an electronic funds transfer at point of sale (EFTPOS) card allowing consumers to convert virtual currency to Australian dollars to make purchases at EFTPOS terminals in Australia. The CoinJar Swipe product is a financial product issued under an Australian financial services licence,28 which is distinct from the virtual currency exchange services offered by CoinJar.

vi REGULATION OF MINERS

See Section IX for information on how mining activities are treated under taxation legislation.

No obligations otherwise apply specifically to miners, other than the general obligations described throughout this chapter.

vii REGULATION OF ISSUERS AND SPONSORS

See Section II regarding the application of the Corporations Act to virtual currency and ICO token issuers and sponsors.

See Section VIII regarding virtual currency and ICO token issuer and sponsor compliance obligations under the Competition and Consumer Act 2010 (Cth) and the ACL for issues such as making market representations.

viii CRIMINAL AND CIVIL FRAUD AND ENFORCEMENT

Several laws regulate enforcement activities relating to the marketing and selling of virtual currencies and ICO and STO tokens in Australia. Regulators' investigative and enforcement powers include seeking substantial civil, and in some cases criminal, penalties for breaches.

The main regulatory focus is currently on TGEs, pursuant to which issuers, advisers and promoters alike can be held liable for engaging in illegal conduct. Separately, AUSTRAC is focusing on registration and reporting compliance obligations for virtual currency exchanges, as described in Section V.

i Misleading and deceptive conduct

Under Australian law, misleading or deceptive conduct is prohibited in the course of business29 and under the securities law in connection with financial services and in relation to financial products.30 In May 2018, ASIC announced it would issue inquiries to ICO issuers and advisers where it identifies conduct or statements that may be misleading or deceptive, noting that 'regardless of the structure of the ICO, there is one law that will always apply: you cannot make misleading or deceptive statements about the product. This will be a key focus for us as this sector develops'.31

ASIC has also issued guidance noting specific examples of potentially misleading and deceptive conduct for ICOs, which would likely extend to TGEs:32

  1. using social media to artificially inflate public interest in a TGE;
  2. undertaking or arranging for a group to engage in trading strategies to generate the appearance of greater buying and selling activity levels for a virtual currency or ICO or STO token;
  3. failing to disclose adequate information about a TGE; or
  4. suggesting that a TGE is a regulated product or that the regulator has approved a TGE, if that is not the case.

To date, ASIC has intervened to protect consumers from at least one ICO issuer, citing fundamental concerns regarding the ICO's structure and business growth forecasts in its white paper disclosure, which ASIC considered 'very optimistic'.33 Remedies available to consumers, regulators and courts in respect of misleading and deceptive conduct (including for making false or misleading representations) include maximum pecuniary penalties ranging between A$945,000 (for individuals), and the greater of A$10 million, three times the value of the benefit received by the corporation as a result of the conduct, or where the benefit cannot be calculated, 10 per cent of the annual turnover in the preceeding 12 months (for corporations), or 10 years' imprisonment,34 and injunctions (such as an injunction blocking a TGE),35 compensation for damages and other orders.

ii Unlicensed financial products and markets

The Corporations Act sets out specific obligations regarding financial products and markets regarding disclosure, licensing and registration obligations. Penalties applicable to conduct that breaches the licensing and registration requirements under the Corporations Act include fines of up to A$105,000 or five years' imprisonment for individuals, or fines of up to A$525,000 for corporations, depending on the breach.

In 2017, a taskforce to review the enforcement regime administered by ASIC conducted by the Federal Minister for Revenue and Financial Services recommended increasing the penalties for various breaches under the Corporations Act, citing that in some cases, the maximum penalties 'no longer reflect the seriousness of contraventions, and may, in some cases, be substantially lower than the potential profits from misconduct'.

Given the current and growing regulatory and governmental scrutiny of Australia's financial services sector (including ASIC's role), penalties for unlicensed financial products and markets will likely increase to align with the taskforce's recommendations.36

iii AML/CTF breaches

Failure by a registrable DCE operator to comply with AUSTRAC's registration requirements, described in Section V, including providing unregistered virtual currency exchange services and breaching registration conditions, can result in up to two years' imprisonment or a A$105,000 fine, or both. The penalty can increase to up to seven years' imprisonment or A$420,000, or both, for repeat offenders and for failing to comply with undertakings.

AUSTRAC has historically sought significant penalties to deter breaches of the laws it administers, and DCE operators should expect the same treatment regarding the new AML/CTF provisions. For example, in 2018, the Commonwealth Bank of Australia agreed with AUSTRAC a settlement involving a A$700 million penalty for over 53,000 breaches of the AML/CTF Act, which included failing to comply with its AML/CTF programme in respect of 778,370 bank accounts.

Following the introduction of new AML/CTF requirements on DCEs on 3 April 2018, until 2 October 2018 AUSTRAC may only take enforcement action against registrable DCE operators if they have failed to take reasonable steps to comply with the AML/CTF requirements.37 This initial grace period reflects the desire by the government to take a collaborative approach with the industry, acknowledging that these new compliance requirements will take time to implement.

ix TAX

The ATO has issued guidelines and general commentary regarding virtual currency treatment under Australia's taxation regime. The ATO views virtual currencies as assets with tax consequences, rather than money or currency. The main tax considerations are:

  1. income tax;
  2. capital gains tax;
  3. goods and services tax (GST); and
  4. fringe benefits tax.

i Income tax

Australia's income tax regime is principally set out under the Income Tax Assessment Act 1936 (Cth) and the Income Tax Assessment Act 1997 (Cth). Under this regime, tax is levied on the taxpayer's taxable income derived during the relevant income year, subject to certain allowable deductions that are exempt from taxable income. Marginal tax rates apply to individuals depending on their level of taxable income, while the current company tax rate is 30 per cent (with a reduced company tax rate of 27.5 per cent for small business entities).

If a person carries on a business (e.g., for commercial reasons, in a business-like manner) that involves transacting with virtual currency,38 any virtual currency held by the business (whether as part of an incorporated entity or not) will likely be treated as trading stock. This means that proceeds from the sale of a virtual currency will be treated as ordinary income and assessed accordingly, while the costs of acquiring a virtual currency (such as its purchase price and any associated fees) are deductible.39

ii Capital gains tax

In relation to a virtual currency disposal, the ATO has issued guidance clarifying that capital gains tax may apply where virtual currency is sold or gifted, traded or exchanged, converted to fiat currency, or used to obtain goods or services.40 In circumstances where one virtual currency is disposed of to acquire another, the capital gain (or loss) arising from the disposal is worked out using the market value of the original virtual currency when it is disposed of.

Whether capital gains tax applies to a virtual currency disposal depends on whether it is held as an investment, or as a personal use asset kept primarily to purchase items for personal use or consumption:

  1. if held as an investment, any capital gains from a virtual currency disposal will be added to an individual's assessable income provided that, if the individual held the virtual currency for at least 12 months prior to its disposal, any capital gain is eligible for a 50 per cent discount; and
  2. if held as a personal use asset and acquired for less than A$10,000, a virtual currency will generally be exempt from capital gains tax; however, any capital losses from its disposal cannot be used to offset any capital gains.

iii GST

Since 1 July 2017, no GST (i.e., Australia's value added tax regime) consequences arise in relation to the purchase or sale of a virtual currency, or its use as a payment, unless a person is carrying on a business in relation to the virtual currency, as described above.

iv Fringe benefits tax

If an employee has a valid salary sacrifice arrangement with its employer (i.e., to receive a virtual currency as remuneration for work performed instead of Australian dollars), the payment of the virtual currency may be a fringe benefit, making the employer subject to fringe benefits tax. Employers must pay tax at 47 per cent on the taxable value of fringe benefits provided to employees, such as cars and mobile phones, and, in this case, virtual currencies. If there is no valid salary sacrifice arrangement, the virtual currency will be deemed to have been earned as ordinary salary or wages, and the employer must meet its pay as you go tax obligations on the Australian dollar value of the virtual currency it pays to the employee.

x OTHER ISSUES

As noted in Section I, the DCI Code was published by the ADCA in February 2016 following the recommendation of the 2015 Senate Economics References Committee Report on Digital Currencies regarding the development of a self-regulatory model in consultation with government agencies.41

The DCI Code may be voluntarily adopted by virtual currency businesses that are located or provide services in Australia.42 Businesses certified by the ADCA as DCI Code-compliant must be independently audited and adhere to certain best practice standards.43

The DCI Code also requires certified members to adopt, maintain and comply with an AML/CTF and sanctions compliance programme addressing a risk assessment framework, employee due diligence processes, governance controls and AML/CTF compliance.44 See Section IV regarding AML/CTF obligations and Section V regarding virtual currency exchange regulation.

xi LOOKING AHEAD

As with many jurisdictions, Australia's legal and regulatory landscape for blockchain technologies is in its infancy, and will continue to evolve as blockchain technologies and related use cases continue to develop.

Virtual currencies and TGEs have represented the main initial use cases for blockchain technologies, and consequently have been the main area of focus for regulators to date.

As blockchain-use cases expand over the next few years and the business models become more diverse, we expect the legal and regulatory landscape will continue to evolve as policy-makers and regulators seek to grapple with these developments and realign the legal and regulatory landscape in response.

i Higher levels of enforcement action likely in the short term

Australia has had numerous TGEs in the past 12 to 18 months. However, TGEs in Australia remain a less prominent fundraising tool relative to other nearby jurisdictions such as Singapore, which has been quicker to embrace blockchain technologies as a competitive differentiator and now serves as the main regional hub for launching ICOs.

The prevalence of poor quality ICOs (and outright scams) globally has contributed to a negative perception of ICOs in Australia. While not all ICOs deserve such a negative perception (and there are typically a range of legitimate reasons why blockchain start-ups and FinTechs will seek to raise funds through ICOs), it is poor quality and scam ICOs that are likely to preoccupy the initial phase of enforcement activity in the next 12 to 18 months.

ASIC's enforcement approach to ICOs is likely to broadly follow that adopted by the US Securities Exchange Commission, which has focused its enforcement priorities on fraud and misleading conduct, and more egregious breaches of local securities law. We expect ASIC's focus to be on the 'low-hanging fruit' in the first instance, with a focus on issuers that engage in misleading and deceptive conduct, or that otherwise proceed with TGEs that more obviously breach local security laws. We also expect AUSTRAC to promptly commence enforcement activities for DCE compliance failures after the end of the policy principles period on 2 October 2018.

ii STOs will become more prominent as tokenisation moves into more traditional asset classes

We are already starting to see entities that wish to undertake TGEs becoming more sophisticated in their approaches, which have started to move beyond simplistic attempts, via white papers, to structure around existing securities legislation or rationalise regulatory compliance obligations.

We see the rise of STOs as the next big step in the use of blockchain as a fundraising tool. This will extend the benefits of tokenisation beyond the creation of virtual currencies and utility tokens into new areas.

There are a range of factors that are likely to drive the shift to STOs over time:

  1. greater levels of regulator-led scrutiny and enforcement against unregulated offerings;
  2. the application of tokenisation and fractional ownership techniques to new asset classes (e.g., illiquid assets) and business models (e.g., crypto VC funds and hedge funds) that need to be structured to comply with local securities law;
  3. the entry of more traditional funding sources into crypto markets, such as VC funds, family offices and large financial institutions; and
  4. the greater use of technology to remove the costs associated with the launch of regulation-compliant securities across several markets.

The shift to STOs is also likely to be accompanied by a shift to a compliant by default approach to TGEs, where the underlying rights associated with the relevant token are treated as a security or financial product.

Unlike traditional funding mechanisms, such as initial public offerings, which have significant costs and risks that cannot otherwise be avoided, the availability of standardised regulation-compliant security token platforms will play a significant role in facilitating the more cost-efficient delivery of STO-based fundraising. Several platforms have already started to emerge globally in this space (e.g., Securitize and Harbor). Over time, we expect these platforms to be used to drive fundraising activity across several jurisdictions in parallel as a means of increasing the investor pool in a manner that complies with the securities, taxation and AML/CTF legislation in each jurisdiction. Australia will not be immune to these developments.


Footnotes

1 Ara Margossian is a partner, Marcus Bagnall is a senior associate and Ritam Mitra and Irene Halforty are lawyers at Webb Henderson.

2 Corporations Act 2001 (Cth) (Corporations Act) Chapter 6 and Chapter 7.

3 On 19 April 2018, ASIC received delegated powers from the ACCC to take action under the ACL relating to crypto-assets and ICOs, regardless of whether it involves a financial product.

4 ASIC Information Sheet 219: Evaluating distributed ledger technology.

5 ASIC Information Sheet 225: Initial coin offerings and crypto-currency (INFO 225).

6 See Corporations Act Chapter 7, Part 7.1 Division 3.

7 Corporations Act Section 9.

8 Ibid., Section 601ED. Note that an MIS does not need to be registered if all interests issued would not have required a product disclosure statement (PDS) had the scheme been registered.

9 ASIC media release 18-122MR: ASIC takes action on misleading or deceptive conduct in ICOs, https://asic.gov.au/about-asic/media-centre/find-a-media-release/2018-releases/18-122mr-asic-takes-action-on-
misleading-or-deceptive-conduct-in-icos
; Jacobs, S 'ASIC is taking aim at dodgy ICOs as it issues a warning to the sector', Business Insider Australia, 1 May 2018.

10 Corporations Act Section 763D(1). Examples include the direct debit of a deposit account, gift vouchers or cards, prepaid mobile phone accounts and loyalty schemes.

11 ASIC Information Sheet 225: Initial coin offerings and crypto-currency (INFO 225).

12 For the type of relief that ASIC may order with respect to an individual or class of products or arrangements, see ASIC Regulatory Guide 185: Non-cash payment facilities, RG 185.9. At the time of writing, ASIC has not granted class order relief or declared any virtual currencies or ICO tokens as exempt from Chapter 7.

13 Corporations Act Section 708.

14 Ibid., Part 6D.3A. Note that the CSF intermediary must have an Australian financial services licence to provide crowdfunding services and meet the licensing compliance obligations: ibid., Section 738CZA. See also ASIC Regulatory Guide 262: Crowd-sourced funding: Guide for Intermediaries.

15 The payments system in Australia refers to arrangements that allow funds transfers between accounts, typically held in financial institutions, through instruments such as cash, credit cards and cheques, and through electronic funds transfer.

16 RBA media release: Payment Systems Board Update: 23 February 2018, https://www.rba.gov.au/media-releases/2018/mr-18-04.html.

17 RBA speech: Cryptocurrencies and distributed ledger technology, Tony Richards, Head of Payments Policy Department, Sydney 26 June 2018, http://www.rba.gov.au/speeches/2018/pdf/sp-so-2018-06-26.pdf, p11.

18 RBA, Submission 19, p. 9; Dr Anthony Richards, Reserve Bank of Australia, Committee Hansard, 7 April 2015, p. 45.

19 RBA Address to 2017 Australian Payment Summit, Governor Philip Lowe, Sydney 13 December 2017 https://www.rba.gov.au/speeches/2017/sp-gov-2017-12-13.html.

20 AUSTRAC typologies and case studies report 2012, http://www.austrac.gov.au/sites/default/files/documents/typ_rprt12_full.pdf.

21 Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (Cth).

22 The AML/CTF Act does, however, provide for methods for certain activities to be declared through the rules made under ibid., Section 229. See, for example, the definition of stored value card: ibid., Section 5.

23 Ibid., Section 6.

24 Ibid., Parts 2, 3, 4, 7, 10.

25 Ibid., Part 7 Div 3.

26 Ibid., Part 3.

27 Ibid., Section 76A. It is an offence for a registrable DCE operator to provide DCE services without being registered on the DCE Register: ibid., Section 76A(3). AUSTRAC can also refuse, suspend or cancel a registration on certain grounds, such as where the DCE poses an unacceptable money laundering, terrorism financing or other serious crime risk: ibid., Part 6A Division 3.

29 ACL Section 18.

30 Corporations Act Section 1041H; Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) Section 12DA.

32 ASIC Information Guide 225: Initial coin offerings and crypto-currency (INFO 225).

34 See ACL Section 224(3); ASIC Act Section 12DB; Corporations Act Schedule 3 Item 310.

35 ACL Section 232.

36 See Treasury Department, ASIC Enforcement Review Taskforce Report: https://treasury.gov.au/review/asic-enforcement-review/r2018-282438; Treasury Department, Australian Government response to the ASIC Enforcement Review Taskforce Report, https://treasury.gov.au/publication/p2018-282438.

37 Anti-Money Laundering and Counter-Terrorism Financing (Digital Currency Exchange Register) Policy Principles 2018, issued under AML/CTF Act Section 213.

38 Examples include virtual currency traders, miners, exchange operators and virtual currency ATM operators.

39 Australian Taxation Office: Tax treatment of crypto-currencies in Australia – specifically bitcoin, QC42159, https://www.ato.gov.au/misc/downloads/pdf/qc42159.pdf, p7.

40 Ibid., p. 7.

41 Recommendation 3, Digital Currency – game changer or bit player, Senate Economics Reference Committee, 4 August 2015 at [5.64].

42 DCI Code Clause 3.2, ADCA, http://adca.asn.au/home-2/code-of-conduct.

44 Ibid., Clause 4.3.2, ADCA, http://adca.asn.au/home-2/code-of-conduct.