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ABIB - AUSTRAC Meetings

AUSTRAC x Virtual Asset Service Provider (VASP) Forum

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Australia’s AUSTRAC along with the Australian Bitcoin Industry Body, as well as cryptocurrency industry representatives recently met to discuss upcoming legislative changes affecting Digital Currency Exchanges (DCEs), hereforth being referred to as Virtual Asset Service Providers (VASPs), as well as and the broader digital asset ecosystem. The focus was on proposed AML/CTF reforms, reporting obligations, and industry concerns impacting small businesses.

Here were the headline items:

From DCE to VASPs:

  • Digital Currency Exchanges (DCEs) are reclassified under a new term – Virtual Asset Service Providers (VASPs).
  • Enrolment requirements are expected to remain largely unchanged.

Reporting Obligations:

  • New compliance requirements for International Funds Transfer Instructions (IFTIs) based on fiat currency values.
  • Implementation is planned after 2026 due to complexity.

AML/CTF Act Reforms:

  • Shift towards an outcomes-focused approach to meet Key Performance Indicators (KPIs) without overburdening compliant entities.
  • Active efforts to address debanking issues in collaboration with the Treasury.

Support for Small Businesses:

  • AUSTRAC seeks input to define “small business” within the cryptocurrency sector.
  • Aim to provide tailored compliance guidance for high-volume, low-risk entities.

Consultation Timeline:

  • First round of consultations: January–February 2025.
  • Second round: March–April 2025.
  • Finalization targeted for mid-2025.

Engagement with ASIC:

  • Upcoming ASIC Regulatory Guide 225 may impact the industry.
  • Industry participants encouraged to engage with ASIC regarding Bitcoin-specific concerns.

Formation of Reporting Groups:

  • Proposal to create specialized reporting groups to streamline compliance and reduce costs.

Customer Due Diligence Challenges:

  • Issues with false positives in Politically Exposed Persons (PEP) screenings causing operational delays.
  • Need for improved collaboration with banks to enhance Know Your Customer (KYC) processes; AUSTRAC asked to bring Banking Sector to the table on this issue.

Travel Rule Challenges:

  • Complexities in applying the Travel Rule to cryptocurrency transactions, particularly Bitcoin due to it’s decentralised protocol.

Alignment with International Standards:

  • Avoiding overly prescriptive regulations by aligning with Financial Action Task Force (FATF) guidance.
  • Considering approaches from countries like Japan and the United States.

Impact on Small Businesses:

  • Concerns that excessive regulation may force small businesses to exit the market.
  • Commitment to supporting businesses of all sizes within the regulatory framework.

Recognition of Compliant Entities:

  • Proposal for regulators to acknowledge and differentiate businesses demonstrating high compliance standards.
  • Potential development of programs to highlight exemplary industry participants.

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