What are the Legal Requirements for Operating a Crypto Exchange in Australia?

What are the legal requirements for operating a crypto exchange in Australia?

Regulatory Requirements

Today Australia is leading the fintech industry after legalizing cryptocurrency in 2017. However, there are certain rules to be aware of when trading on Australian crypto exchanges. In Australia, digital currency exchange providers must be registered with AUSTRAC before providing exchange services. While AUSTRAC has the authority to reject, cancel or suspend the applied registration. In the case of an existing registration, the providers must renew their registration every three years and maintain the details with all new updates.

The Australian government also declared that all cryptocurrency exchanges must be registered with the Anti-Money Laundering(AML) and Counter-Terrorism Financing(CTF) Act of 2006. With these AML/CFT robust policies, AUSTRAC means that an Australian crypto exchange must report suspicious transactions. Its goal is to prevent cryptocurrencies from being used for money laundering or other crimes. However, the providers must keep an eye on any suspicious trading activity.


Establishing and running a crypto business needs a permit from the regulatory of the respective nation where one has to carry out operations with crypto assets. It is known as a crypto license. However, strict regulations from the Australian Securities and Investments Commission (ASIC) state that those who want to engage in the crypto exchange business must have an appropriate cryptocurrency license. A digital currency exchange provider must have an Australian Financial Services License (ASFL). Although one must meet some requirements to obtain a crypto license, counter-terrorism financing and anti-money laundering are necessary. It is a violation of Australian law to provide cryptocurrency exchange services without registration.

Meanwhile, crypto exchange Australia also applies taxation rules. So before you start trading, please check some well-known and reputable crypto exchanges in Australia, fulfilling basic factors like KYC, AML, trading fees, convenient usage, method of deposit, security measures, and customer support. However, the best crypto exchange Australia would definitely take care of all the required licenses for their uninterrupted and long-term business services.


The Australian Taxation Office (ATO) considers cryptocurrency investments as property or asset for Capital Gains Tax(CGT) purposes. Hence, tax payment is mandatory on the crypto in Australia if it is an investment. Depending upon specific conditions, cryptocurrency coins, stablecoins, NFTs, and tokens may also fall under additional income and can be taxed as Income Tax. It is crucial to understand the tax consequences if you plan to start a crypto business in Australia.

Virtual Digital Assets cannot be considered service under the GST Act but falls under the definition of goods, considered movable property. Hence, the sale of Virtual Digital Assets (VDA) like NFT crypto is taxable under the GST Act. So if a trader has bought, sold, or earned interest from crypto, the tax is calculated for the last financial year, i.e., 1st July to 30th June, and they have to declare all crypto totals in their coming Etax return.


There has been some advancement on the regulatory front in Australia. As we know, many unregulated and volatile crypto markets are at potential risk. The recent FTX collapse has threatened the future of crypto. Hence, an immediate regulatory need arises to safeguard investors’ funds. The Australian government intends to introduce a custody regime for digital assets and licensing for crypto exchanges as early as possible. This includes token mapping, exchange regulations, taxation on crypto assets, and custody regime.

There has to be basic compliance clarity for the rapidly expanding crypto industry. Digital currency exchange providers must ensure compliance with cryptocurrency regulations in Australia by implementing processes to prevent money laundering and terrorism financing. It is mandatory for the cryptocurrency exchange Australia to keep records to show their compliance with their AML/CTF obligations so that if the exchange platform is being misused for a criminal purpose, the records will help with the investigation.

Anti-money Laundering (AML) and know-your-customer (KYC) compliance

Usually, the KYC process is used to verify a customer’s identity. However, the purpose of KYC in the crypto industry is more specifically to limit illegal activities like terrorist financing, tax evasion, and money laundering. Hence, crypto exchanges in Australia must be AML and KYC-compliant. This procedure will safeguard the customers onboarding to the crypto industry. The legislation intends every exchange platform to register and adopt the Know Your Customer (KYC) process.

This includes verification and identification to monitor any large suspicious transactions. Choose a platform that offers KYC service, which is mandatory to prevent scams and huge losses. Identity verification will help minimize money-laundering purposes and also prevent unidentified scammers from stealing your money. Moreover, KYC helps to build trust and transparency with the customers. This is an important aspect of maintaining the integrity and reputation of the crypto exchange and ensuring compliance with legal requirements.

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