Australia Introduces New Crypto Regulation to Address ‘Debanking’ as the Country Faces Possible Recession

Just months out from a federal election, the Australian Government has announced a new crypto regulation, aiming to provide more certainty for crypto traders while providing some freedom for blockchain innovators. Larger crypto platforms must apply for a financial services license, while smaller platforms will be exempt. The Australian economy has been suffering with high interest rates, ongoing inflation, and a possible recession looming around the corner.

Jim Chalmers, Australian Federal Treasurer, announced Thursday evening that the new regulation aimed to provide clarity and certainty for the digital assets sector. Cryptocurrency is popular in Australia, but many traders may be apprehensive about selling their tokens out of fear of draconian tax policies, regulatory hurdles, and an overly complicated reporting system. Crypto traders may have watched the announcement with trepidation, hoping for some assurance that crypto policies will be reasonable and clear. 

“We know that digital assets and blockchain,” said Chalmers, “represent big opportunities for our economy, financial sector, the payments industry, and capital markets. We want to seize these opportunities and encourage innovation at the same time as making sure Australians can use and invest in digital assets safely and securely with appropriate regulation”.

Chalmers described the crypto industry as a “key sector” and mentioned the problem of debanking, where banks refuse to service crypto customers, to encourage Australian banks to embrace the crypto industry. Many Australians still consider crypto a scam and may need encouragement to dispel their negative beliefs about the industry. With Australia going through a cost-of-living crisis, there is little room for excessive regulation because any economic barrier only worsens the situation. Further, Australia may be on the verge of a recession, giving the government every reason to cut red tape and encourage technological innovation. 

“It’s great to see,” wrote Jonathon Miller, Kraken’s managing director of Australia, “recognition of the urgent need for bespoke crypto legislation to address the confusion and uncertainty facing Australian crypto investors and businesses. By establishing a clear regulatory framework and mitigating problems like debanking, the government can remove the barriers hampering growth in the Australian economy”.

The Coalition, Australia’s second major party, said it would adopt crypto regulation to increase institutional use of blockchain technology. A populist faction currently rules the Coalition, which has made positive remarks about Trump’s economic policies.

Chalmers added that firms that use crypto for nonfinancial uses, such as developing software or maintaining digital asset structures, will not have to seek a license.

Debanking has been an ongoing concern for crypto investors, where banks refuse clients who work in the crypto sector. Chalmers said that debanking has devastating effects on Australian businesses trying to operate a crypto operation. Debanking, he added, stifles competition and leads to stagnation. 

In December 2024, Stephen Jones, Assistant Treasurer, wrote a proposal in anticipation of the new crypto regulation.

“Millions of Australians,” wrote Jones, “are using or investing in digital assets every year, and we want to make sure they can do that as safely and securely as they can while also encouraging innovation. That’s why we welcome the Australian Securities and Investments Commission’s announcement today that it will work with stakeholders to update its advice on digital assets, including cryptocurrency. The independent regulator will consult widely to update its guidance about how current financial product definitions apply to digital assets and related products”.