Investing in or otherwise exchanging fiat currency (such as AUD) for cryptocurrency is gaining in popularity. There are more exchanges popping up every day to help people with their investments. Some of the most popular cryptocurrencies are Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Ripple (XRP) Cardano (ADA) and Bitcoin Cash (BCH).
As such, there are new regulations under the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws of Australia. However, it can be an overwhelming process for cryptocurrency exchanges while they work to keep up with the new regulation.
New Investors for Cryptocurrency Exchanges
There are a lot of investors coming out of the woodwork to trade in cryptocurrency exchanges. There are more cryptocurrency exchanges than ever before. There are also over 1400 types of coins being offered. New ICOs, known as initial coin offerings, happen all the time. Australians are looking to invest because it makes it possible to cut out the middleman when conducting global financial transactions. The benefit is understood and many people want to choose a coin that will enable them to see growth in their investment.
This study by the Australian Digital Commerce Association (ADCA) and consulting practice Accenture shows how cryptocurrency trading has become such a huge business in Australia. The exchanges have processed around 2.7 million transactions in a single year, worth over AU$3.9 billion (in fiat currency).
Cryptocurrency Regulation in Australia
As a result of all of the activity, there are regulations coming from the Australian government. Australia is working hard to impose specific regulations for bitcoin as well as the other cryptocurrencies. These fall under the AML/CTF Act and Rules (Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 & Anti-Money Laundering and Counter-Terrorism Financing Act 2006).
There are new and emerging threats that need to be dealt with, according to former Justice Minister Michael Keenan. There have been reports highlighted that any e-currency, including bitcoin, allows terrorist to transfer money anonymously.
How Regulations are Impacting the Exchanges
Cryptocurrency exchanges that operate in Australia are required to register with AUSTRAC (Australian Transaction Reports and Analysis Centre). Additionally, they must adopt and maintain a working AML/CTF program so that money-laundering risks are identified and mitigated. They need to identify and verify customer activities and also report suspicious activity. Certain records must also be maintained for a minimum of seven years.
This could have a considerable impact on business growth because all exchanges need to go through the registration process. It can take up to six months, which means that investors may not have the option of as many exchanges as they once had. The new regulations could also impact the customer experience considerably, too. Many customers may feel as though the identification and verification of activities are going against their desire to maintain an anonymous and private profile.
The Challenges of Being Regulated
There are a number of challenges with being regulated. Many exchanges will find it challenging to create and operate an AML/CTF program. Additionally, they need to make sure that records are maintained flawlessly in order to report to AUSTRAC.
Nevertheless, there is a significant amount of clarity in terms of how the regulations are going to be enforced and what businesses are required to do. There is also a single authority that will handle the enforcement and regulations, offering more simplicity than what other countries are rolling out.
Exchanges are encountering a variety of problems, however. This includes things with understanding the regulations, ID verification, and how to submit the various reports.
How VIX Verify Helps Exchanges Meet Regulations
Regulations are not going to go away. In fact, the Australian government will likely impose more regulations as cryptocurrency becomes a bigger business. VIX Verify can help with AML/KYC compliance. This includes using what’s known as greenID. The greenID online ID verification system can be seamlessly integrated into the current onboarding process of a cryptocurrency exchange in order to identify customers and minimize the risk of issues associated with laundering money. Providing a platform that may assist digital currency exchanges to meets the latest regulations will establish trust with investors, leading to a better user experience.
When you are ready to learn more about how VIX Verify’s greenID can help you, contact us for more information.