Aussie crypto exchanges look to new licensing regime with cautious optimism

October 16, 2023 Coin Telegraph

Australian crypto exchanges have largely praised the Treasury’s latest proposal to place crypto exchanges under the existing financial services license regime, though some worry it could put the crypto industry into a TradFi-shaped box.

Australian crypto exchanges have praised plans from the Australian Treasury to regulate cryptocurrency exchanges under pre-existing financial services licensing measures.

In an Oct. 16 consultation paper, the Treasury outlined a new suite of proposed regulations, that suggested regulating cryptocurrency exchanges under existing financial services rules as well as introducing a wealth of new guidelines for all Australian firms dealing in digital assets.

Speaking at the Australian Financial Reviews Crypto Summit event on Oct. 16, Australian Treasury Stephen Jones said the new regime was focused on three primary areas: providing a framework for industry growth and innovation, allowing regulatory certainty to crypto service providers, and ensuring that everyday consumers and their assets remain protected.

Australian crypto exchanges will be regulated under pre-existing financial services laws, suggests the latest consultation paper from the Treasury. https://t.co/V1Dr8DeZF8
— Cointelegraph (@Cointelegraph) October 16, 2023

Caroline Bowler, the CEO of BTC Markets told Cointelegraph she was pleased to have reached a new “key milestone” in the regulatory process and regarded the rules as a positive progression for the wider crypto industry in Australia.

“It’s a great next step for the Australian economy. Digital assets are so clearly the future of financial services. It is imperative the country keeps pace with our international peers, with a robust regulatory framework,” said Bowler.

Similarly, Adrian Przelozny, the CEO of Independent Reserve commended the Federal government on its recommendations to introduce stronger regulation and policy change, telling Cointelegraph that these new proposals could help restore trust in the crypto sector.

“We firmly believe these changes will drive investment, provide certainty to the sector and ultimately, increase consumer protection.”

The general counsel of Swyftx, Adam Percy, also agreed with much of the Treasury’s proposals, saying the primary focus should be ensuring that crypto investors can safely access the benefits of blockchain technology, while still allowing room for innovation.

However, Jonathon Miller, the Managing Director of Kraken Australia, told Cointelegraph he was concerned that the new rules would be stuffing the crypto industry into a TradFi-shaped box.

“Australia is now in the unfortunate situation where our regulation has taken a very long time, so we’re taking the approach of shoehorning crypto into existing financial services regulation,” said Miller.

Still, Miller admitted that the consultation paper was a step in the right direction, especially for providing much-needed regulatory certainty for crypto companies operating on Australian soil.

“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,” he added.

Liam Hennessy, a partner at Clyde & Co — an international law firm that has been assisting in the consultation process — said that the newest proposal from the Treasury “makes sense” for the Australian crypto industry.

Hennessy explained that the new rules will help the nation catch up to jurisdictions such as the European Union who are further along in their efforts to better regulate crypto.

Additionally, he said the Australian Financial Services (AFS) licensing regime can be quite complicated, meaning that local cryptocurrency exchanges and digital asset service providers will need to begin preparing their applications now.

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Turns out, it’s pretty difficult to insure crypto users and platforms

May 28, 2023 Coin Telegraph

Adrian Przelozny

A crypto insurance provider will typically assess at least 2,000 variables across 20 risk areas before they even consider insuring a platform, according to an insurance executive.

Crypto insurance providers spend enormous amounts of time judging whether to provide coverage to a crypto company, and almost none of them offer assurances to individuals, insurance and crypto executives told Cointelegraph.

Last year saw $3.9 billion stolen from crypto companies, decentralized finance platforms and users, a massive 22% rise from the prior year — and that’s only counting hacks and exploits. Some believe 2023 could be even worse.

Raymond Zenkich, president of cryptocurrency insurance firm Evertas, told Cointelegraph that it’s a complicated process to initially assess the risks of a crypto platform.

He explained that initially, an underwriting — the process of evaluating and analyzing the risks of insuring the assets — is performed “based on a very detailed application form” that involves crunching 2,000 variables across 20 risk areas.

“A significant risk factor is key management: whether keys are stored in hot, warm, or cold wallets,” Zenkich noted.

Hot, warm, and cold crypto wallets each have different levels of risk. Did you know that until we did it, there was no standard definition of hot vs. warm? Standards development is one way insurance helps emerging markets mature.https://t.co/5OtqpLa8Oh
— Evertas (@Evertas) January 20, 2023

He added that it doesn’t just stop there, as “there are several gradations of hot and warm, each with their own risk profile.”

On April 14, cryptocurrency exchange Bitrue suffered a hot wallet exploit, with attackers stealing nearly $23 million worth of crypto assets. The affected hot wallet held less than 5% of the exchange’s overall funds, and the remaining wallets have “not been compromised," according to the firm.

Zenkich explained that after determining the level of storage risk, the firm will then need to look at thousands of "business, technology, and operational variables,” before being able to work out how much of a premium to charge, stating:

“Once we have the answers to all the applicable questions, we determine what kind of premium we would need to charge to justify taking on the risk.”

That being said, crypto insurance providers are usually unwilling to insure individuals whodon’t hold assets on an exchange — such as through self-custody or other means.

Adrian Przelozny, CEO of the Australian crypto exchange Independent Reserve, said that this is because it “would be very hard” for a customer to prove to the insurance provider they actually lost the crypto and didn’t just take it themselves.

: Crypto hacks are down (for now)
Following a record-setting 2022, which saw USD 3.7 billion in stolen crypto, new research from TRM Labs shows crypto hacks are down 70% in Q1 2023. What's driving the trend and how long will last https://t.co/exxBwJKzjP
— TRM Labs (@trmlabs) May 23, 2023

Przelozny explained that while the provider only insures assets on the exchange platform itself, its “customers have a direct relationship with the insurer,” and “can choose to have 100% insurance coverage,” for a small fee when signing up.

He added that it’s a long insurance contract with many events covered, from hacks to “theft caused by our team.”

Meanwhile, a spokesperson for cryptocurrency exchange Binance told Cointelegraph that its emergency insurance fund, the Secure Asset Fund for Users (SAFU), is managed internally.

“It is a fund that is owned by Binance [that] was established in July 2018 to protect users’ interests,” they said.

“A verified loss sustained by a user from a vulnerability or other deficiency in Binance’s security systems and/or security protocols would be covered by SAFU,” said the spokesperson.

Simon Dixon, CEO of online investment platform BnkToTheFuture, however, believes there are things that traditional insurance providers can learn from their crypto counterparts to improve their practices.

“There is an opportunity to improve on traditional insurance with Smart Contracts and make it more accessible to all which I look forward to seeing grow as an industry, with our sector's usual growing pains.”

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Australian exchanges dispel debanking fears amid Binance saga, but risks loom

May 19, 2023 Coin Telegraph

Binance

Australian crypto exchanges report no problems with their payment providers, but the lack of local laws means more debanking incidents can’t be ruled out.

Australian-based cryptocurrency exchanges have lined up to quash contagion fears after the payments provider for Binance Australia was told to offboard the exchange, though some have warned risks still loom.

On May 18, Binance Australia told users that Australian dollar services were suspended after its payments partner Zepto was told by its partner firm Cuscal to stop support for the exchange.

Independent Reserve CEO Adrian Przelozny told Cointelegraph he doesn’t think “this an industry-wide issue, as it appears to be Binance-specific,” adding the Australian dollar deposits and withdrawals for his exchange “remain uninterrupted.”

BTC Markets CEO Caroline Bowler said she had “no due for concern," adding “we work really closely with [our payments provider], specifically on scams."

A brief note to reassure Aussie crypto traders that @BTCMarkets AUD payment rails are unaffected and open for business.
— Caroline Bowler (@CaroBowler) May 18, 2023

“Nothing's been alerted to me that there are any concerns with BTC Markets,” she said. “We are accountable to them on a monthly basis and have been for a sizable period of time.”

Jonathon Miller, Kraken Australia’s managing director, told Cointelegraph there are “only a couple” of payment providers in the local market “that are crypto-friendly, and we’ve got a really strong relationship with them.”

“It’s very unfortunate to see a business in a position where they have to cut their client’s access overnight,” he said.

“It’s not great for the end-user, it’s not great for the industry, but it seems like it’s part of a broader story with what’s been happening with that enterprise for some time.”

Some of the executives noted a significant uptick in the users, downloads and registrations on their platforms as Binance users seemingly hunt for alternative exchanges with Australian dollar payment ramps.

Debanking risks still lurk

Despite assurances, some of the execs noted the regulatory environment in Australia for crypto gives way to more possible debanking situations taking place.

“The risk of debanking is ever-present irrespective of the latest news from Binance,” Bowler said, adding:

“That is reflective of the regulatory environment that we operate in or in this case, the absence of a regulatory environment.”

Bowler added this is the reason Australia needs “a proper regulatory framework,” which she believes will reassure financial institutions about doing business with crypto exchanges.

Such laws “can have a degree of comfort about the standards which they’re operating to,” she added.

Binance Australia says banking disrupted after payment provider Cuscal cuts off service.

Deposits & withdrawals are stopped, this comes after Australia’a second largest bank, Westpac, banned customers from transacting with Binance.

What is happening to crypto in Australia? pic.twitter.com/wG6UKyrCU4
— The Roundtable Show (@RoundtableSpace) May 18, 2023

Currently, the local industry has a “very limited pool” of payments providers, as exchanges have been “unable to get access to banking rails,” according to Bowler.

Kraken’s Miller said the problem isn’t “necessarily a local issue,” pointing to the bank collapses in the United States and the perceived debanking of crypto companies that followed but added it’s “certainly been a problem in Australia for a long time.”

“There have been other people and industry bodies have been quite vocal about the relationship being relatively strained between crypto businesses and banking in Australia, and that's not new.”

He added Kraken already had or was engaged in obtaining crypto-related licenses in “multiple jurisdictions,” such as Canada, Europe and the United Kingdom, which have various legal regimes for crypto.

“Australia is kind of sitting here with no regime at all,” he said.

Binance Australia loses AUD @MarkDiStef

In one stroke of a bankers pen, the largest exchange in the country can no longer operate as normal.

Long term this makes no difference to bitcoin and ensures that the Australian dollar is slightly less useful than it was last week. https://t.co/aH11pE4Rth
— Daniel Pickering (@the_djp_) May 18, 2023

Jason Titman, Swyftx’s chief operating officer, told Cointelegraph that in the long term, “it’s in everyone’s interests for the cryptocurrency industry to have a healthy relationship with our national banks, and that comes with responsibilities on both sides.”

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Blockchain.com gets regulatory nod from Singapore’s central bank

October 13, 2022 Coin Telegraph

Anchorage

Blockchain.com becomes the second crypto exchange in two days to receive preliminary approval to provide crypto services within the growing crypto hub.

Crypto exchange Blockchain.com has become the latest crypto company to secure preliminary approval from Singapore’s central bank to provide Digital Payment Token services in the city-state.

Blockchain.com’s regulatory approval follows hot on the heels of Coinbase, which revealed it had received the same “in-principle” approval from the Monetary Authority of Singapore (MAS) on Oct. 11.

If officially approved, Blockchain.com would join the likes of companies already licensed for digital Payment Token services including crypto exchanges DBS Vickers and Independent Reserve, digital payment solution provider FOMO Pay, and crypto-friendly payments app Revolut, among others.

Blockchain.com CEO and co-founder Peter Smith commended the country’s regulators for creating a “transparent regulatory process” to foster innovation, stating:

“Blockchain.com commends the Monetary Authority of Singapore on its transparent regulatory process that prioritizes crypto industry oversight while allowing innovation to thrive.”

It is not the first company to make a positive reference to the straightforward regulatory environment in Singapore for crypto companies.

Recently, digital asset platform Anchorage Digital co-founder and president Diogo Mónica pointed to Singapore’s strong regulatory environment and the emergence of a crypto hub as its motivation to choose the city-state as a “jump point” into the Asian markets.

Mónica also highlighted in contrast the lack of regulatory clarity in the United States as a major issue, suggesting that even if a company understands what rules govern an asset it can be difficult to determine which of the 15 regulators they need to engage with.

In August 2021, crypto exchange Independent Reserve was one of the first of 170 global competitors to receive preliminary approval for the DPT license.

CEO Adrian Przelozny also made a positive reference to the transparency of Singapore's regulatory environment, noting at the time:

“A well-regulated environment will benefit both investors and crypto industry stakeholders. With tailormade rules for the crypto industry, Singapore currently has the clearest and most detailed licencing requirements of any jurisdiction in Asia”

Przelozny suggested the license grants “will continue to put Singapore in pole position as the leading financial hub in Asia."

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Massive jump in number of Australians who own crypto: Survey

December 7, 2021 Coin Telegraph

Australians

CEO of Independent Reserve Adrian Przelozny told Cointelegraph that he expects the trend to continue as crypto matures and becomes less volatile.

The 2021 Independent Reserve’s Cryptocurrency Index (IRCI) survey of more than 2,000 people found that the percentage of Australians surveyed who own or have owned crypto has reached 28.8%, up from 18.4% in 2020.

The results suggest that growth in the sector is being driven by the positive experience of those who own crypto, with 89% of those surveyed saying they have made money or broken even, up from 78% in 2020.

Independent Reserve CEO Adrian Przelozny told Cointelegraph that these results didn’t come as a surprise to him, due to an environment in which it has become “very difficult to get returns on investments.”

He stated that “cryptocurrencies have easily outperformed any other assets over the last 12 months,” before adding:

“I think it's quite natural that more and more people get interested in an asset class that's clearly outperforming the rest of the market.”

In October, Cointelegraph reported that Bitcoin (BTC) is the official best-performing asset class of 2021.

Przelozny said that he expects the trend to continue as crypto matures and becomes less volatile. He said that the “biggest ally” of cryptocurrency is that “the longer it's around, the more accepted it becomes.”

“With time, I think you'll see volatility and the perceived risk of this investment reduce.”

28.6% of those surveyed by the IRCI who don’t currently own crypto said they would invest if there were better consumer protections in place. Another 26.6% said they’d buy crypto if industry regulation was improved.

Regulation is needed for continued growth

Przelozny said that “the sector still desperately needs regulation to catch up and provide greater security for both investors and cryptocurrency businesses.”

“I do think that once regulation comes on board, we'll see a whole new class of investors into this space. And I think that's what we've seen in other jurisdictions, like over in Singapore.”

Przelozny told Cointelegraph that he anticipates that older Aussies over 65 will make up the next big wave of investors as these regulatory issues are addressed.

“They're looking for consumer protections from the government before they're willing to take the plunge and enter the cryptocurrency market.”

Unsurprisingly, the 24 to 34-year-old age group was the most trusting of crypto with 27.6% saying they bought in to get rich, while disbelievers in the system are most likely to be found in the over 65 age group.

According to the IRCI, Bitcoin remains the most well-known and popular cryptocurrency, with 89.1% of Australians surveyed saying they’ve heard of it and 21.1% actually owning Bitcoin. The second most popular crypto asset is Ethereum, at 11% reported ownership, up from just 5% in 2020.

The IRCI is an annual cross-sectional survey of more than 2,000 Australians conducted by PureProfile. Independent Reserve says its sample was reflective of the country’s gender, age, and geographic distribution.

Australian women owning crypto has doubled in 2021: Survey

December 7, 2021 Coin Telegraph

Coin Telegraph

The ICRI survey of 2,000 Aussies also found that 56.7% of the women surveyed said that they would enter the crypto market based on advice from family and friends.

A new survey shared with Cointelegraph has found that the proportion of Australian women who own crypto assets has doubled in the last year.

The 2021 Independent Reserve’s Cryptocurrency Index (IRCI) of 2000 Australians found that the number of women who currently or have previously invested in crypto rose from 10.3% in 2020 to 20% in 2021. The percentage of female Bitcoin owners also rose from 8.3% to 14.8% according to the survey.

Independent Reserve is an Australian-based cryptocurrency exchange that was founded in 2013, it has more than 200,000 users.

Karen Cohen, Deputy Chair for the Board of Blockchain Australia, said that more women have entered the crypto market this year as the asset class has continued to become a mainstream investment. Speaking to Cointelegraph, she said:

“I think that it tells you that investing in crypto is less risky and is just one of many different ways you can invest. I think it’s sort of giving the signal that if a bank thinks it's okay, then you know it's a safer place to invest.”

Cohen cited examples such as the CBA adding crypto trading options to its app in early November.

Co-founder of Independent Reserve Adrian Przelozny added that “over time, as cryptocurrency investments become more acceptable and mainstream, the perceived risk also reduces.”

He added: “I think that as that happens, you'll see more and more women enter the market.”

Research by Grayscale from 2019 showed that women tend to be more risk-averse investors, which is often attributed as a reason for the gender gap between female and male crypto investors.

The ICRI also found that women were more likely to listen to family and friends about crypto. 56.7% of the women surveyed said that they would enter the crypto market based on advice from family and friends, as opposed to 42.2% of the men surveyed.

Cohen said, “A lot of women are getting referrals from their friends and family, so they're getting a feeling a bit safer to get involved.”

On the other hand, 45.9% of men said they would consider entering the crypto market due to interest sparked by media coverage, compare to 41.8% of women surveyed.

Closing the gender gap

Cohen said that moving forward, she expects that total gender parity among crypto investors is still “a while away,” because it’s so entangled with gendered stereotypes and the way that women are brought up to understand risk and investment.

Przelozny agreed, saying that he couldn’t possibly speculate as to when the investment gap will close. He said: “As to when it becomes 50/50, I don't know. But I think it's definitely trending in the right direction.”

Cohen also said that as the Metaverse and blockchain gaming begins to dominate the crypto market, users can expect “the landscape to completely change again.”

“Is gaming more of a boy's club than crypto?” she asked, concluding that “nobody really knows.”

In last year’s IRCI report, Cohen urged decision-makers in the crypto industry to include women in events and panel discussions, saying “we are what we see”.

The IRCI is an annual cross-sectional survey of over 2,000 Australians conducted by PureProfile. Independent Reserve says its sample was reflective of the country’s gender, age, and geographic distribution.

Singapore Grants Crypto Licenses to DBS and Independent Reserve

October 1, 2021 Bitcoin.com

independent reserve