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University of New South Wales Law Journal Student Series

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Pearson, Briony --- "Crypto Governance: Australia's Need for Regulation in Crypto Markets" [2022] UNSWLawJlStuS 21; (2022) UNSWLJ Student Series No 22-21




Public interest in cryptocurrencies has skyrocketed. In 2021, the crypto-asset market grew 3.5 times to around AUD $3.6 trillion.[1] Ownership of crypto-assets by Australians surged by 56% last year alone.[2] As new industries capitalise from the innovative technology and public interest grows, novel uses of cryptocurrencies appear.[3] Simultaneously, regulators have expressed fears about the market.[4] Many risks arise from cryptocurrencies, some more immediate than others.[5] Jurisdictions across the world have taken varying approaches to better manage the risk of illegal activity related to their use. Some countries have signalled their support, whilst others have responded with prohibitions and restrictions.[6] The wide variety of responses by regulators indicates the perplexity of regulating this innovative market.[7] The regulatory challenges appear obvious, finding the balance in a regulatory framework that encourages innovation whilst balancing consumer protection.[8] Yet, in practice, this balance is difficult to achieve.

For the time being, regulators in Australia have allowed financial innovation to prevail over the concerns. However, financial innovation is often linked to questionable conduct and unrestrained speculation.[9] Many have asked whether cryptocurrencies are “untethered”.[10] The calls for further consumer protections, alongside the surge in retail consumers, is likely to lead to the introduction of new regulation in the near future.[11]

In Part II, the paper will commence with a discussion on the definition of cryptocurrencies. In Part III, an overview of the current regulation in Australia will be considered. In Part IV, the positive impact of cryptocurrencies on financial markets will be discussed. In Part V, the legal and regulatory implications of cryptocurrencies will be scrutinised. This will focus within the context of Australian law. In Part VI, the paper will examine the legal and regulatory landscape in respect of cryptocurrencies in other jurisdictions. In this section, we will consider the UK, the USA and other APAC countries. Part VII will conclude by examining why the current regulation in Australia is not adequate and why changes are needed. Possible regulatory changes that may help address the current concerns will be considered.


The characterisation process is crucial for determining the regulatory framework which should apply to cryptocurrencies.[12] Creating a conclusive definition has been difficult, and a standard definition does not exist.[13] This is particularly the case from a legal perspective,[14] thus leaving regulators with a challenge. The definition of cryptocurrencies has differed depending on the legal purpose.[15] Under Australian legislation, cryptocurrencies are generally treated as property.

At a basic level, cryptocurrencies, often referred to by the broader category of digital or virtual currencies,[16] are transferable digital assets that function like money.[17] They have an encryption system that allows consumers to pay each other directly over an online exchange.[18] Well-known examples include Bitcoin and Ethereum. Unlike national currencies, cryptocurrencies do not have a legislated or intrinsic value so they are not reliant on any central authority.[19] This differentiates them from other asset classes and emerging technologies: they operate without institutional backing.[20] The demand and perceived scarcity is what determines the value.[21] Transaction information is stored in the distributed ledger technology (‘DLT’), usually in the form of blockchain.[22] Their development has been achievable through the growth of DLT.[23] DLT is an umbrella phase for types of technology that can enable information to be distributed. [24]

Cryptocurrencies are a narrow sub-set of an umbrella class of crypto-assets.[25] Not all crypto-assets are cryptocurrencies, but the terms are often used interchangeably. In this paper, the terms have been used in this way.


Currently, Australia lacks a comprehensive and clear legal framework that protects consumers buying or trading with cryptocurrencies.[26] The distinctive characteristics of cryptocurrencies has created barriers to traditional regulatory approaches.[27] Legislation has been implemented for traditional corporate and trust structures and not for new technological advancements.[28] Several regulators supervise differing aspects of the market but there is no overarching clear framework that directly regulates cryptocurrencies or the industry participants.[29]

Cryptocurrencies are subject to the Capital Gains Tax (CGT).[30] In July 2017, the Australian government removed the double taxation of digital currency; cryptocurrency is now treated like money for GST purposes.[31] This indicates the government’s changing attitude and shift to actively encourage the operation of new cryptocurrencies.[32] Prior to this, the industry was allowed to develop without much regulatory intervention. Following legislative amendments,[33] the Anti-Money Laundering and Counter-Terrorism Financing Act 2018 (‘AML/CTF Act’) applies to cryptocurrency exchanges.[34] Part 6A requires the exchanges to register with the Australian Transaction Reports and Analysis Centre (‘AUSTRAC’).[35] However, AUSTRAC does not hold responsibility for regulating cryptocurrencies and consumer protection.[36] Exchanges must fulfil reporting obligations, maintain records, and sufficiently identify and verify platform users as required under AML/CTF and Know Your Customer obligations.[37] Under Division 2, if an exchange is unregistered, individuals responsible will be subject to criminal and financial penalties.[38] However, AUSTRAC claims it cannot guarantee its registered exchanges are complaint with their obligations.[39]

Unlike consumers of banking products, important protections are not currently provided to consumers of cryptocurrencies.[40] The vast majority of consumers are retail consumers, without specialist knowledge or experience.[41] Yet, cryptocurrency transactions are not covered by the Banking Code of Practice or the ePayments Code.[42] The Australian Financial Complaints Authority (AFCA) is unavailable unless the exchange is a member of the AFCA,[43] with membership being voluntary and easily avoided. Cryptocurrency exchanges are also not required to be licenced leaving regulators with limited ability to monitor transactions and a lack of regulation. However, due to the required registration system, it is a common misconception that cryptocurrency exchanges hold licences.[44]

If cryptocurrencies are “financial products” within the meaning of Chapter 7 of the Corporations Act 2001 or the Australian Securities and Investments Commission Act 2001 (‘ASIC Act’), the Australian Securities and Investment Commission (ASIC) can regulate them.[45] However, “financial product” was defined prior to the emergence of the cryptocurrency market.[46] Many cryptocurrencies are not considered financial products by ASIC and therefore, fall outside the scope of their regulatory power.[47] Consequently, many protections that come with “financial products” are inapplicable.[48] Consumers are unable to obtain relief or assistance if a platform crashes or they are subject to a fraud or scam.[49] That said, regulated financial institutions that include a cryptocurrency within their products are treated as financial products and afforded the similar protections.[50] Likewise, if an exchange allows the conversion of a cryptocurrency to a government-issued currency onto a bank card, the exchange would be caught under the ASIC or Corporations Act as an intermediary facility.[51] Custody of crypto-assets are only subject to mandatory minimum requirements in two circumstances: [52] safekeeping of financial products by custodians and the safekeeping of scheme property, both under the Corporations Act 2001.[53] Outside of these conditions, there are no obligations on industry participants to ensure effective safekeeping and administration of assets.[54]

If crypto-assets are not considered “financial products”, they may be regulated under the Australian Consumer Law (‘ACL’) as a consumer product by the Australian Competition and Consumer Commission (ACCC).[55] The Competition and Consumer Act 2010 (‘CCA Act’) may offer some general consumer protections, such as prohibitions on misleading or deceptive conduct, during the transaction to acquire.[56] Although the transaction is potentially one of barter, this is unlikely to cause significant problems.[57] The definition of “goods” or “services” will need to be met. The term “goods” includes “computer software”.[58] However, it is uncertain whether cryptocurrencies will be classified as “software” and they may fail to be defined as “goods” under the ACL. [59] Although inconclusive, cryptocurrencies may be considered “services” under the CCA Act given that the Reserve Bank of Australia determined that the issuing of bank notes was a supply of service.[60] Cryptocurrencies have the role of a medium, arguably having a “similar right, benefit or privilege” to bank notes.[61] Even if the CCA or ACL are applicable, consumers would face difficulties in pursuing remedies.[62] Often service providers are incorporated outside of Australia, the uniqueness of cryptocurrencies results in special performance orders having practical limitations,[63] and the assessment of damages will be challenging given the price volatility.[64] These factors will result in common law remedies being difficult to pursue.[65]

Even when cryptocurrencies sit outside of legislation, they can often react significantly to signals from regulators.[66] When news reports cover the possibility of restricting or prohibiting cryptocurrencies, their treatment under securities law or the combating of AML/CTF, the market reacts through price volatility.[67] In some respect, exchanges are likely to adhere to mere warnings from the regulators. ASIC released guidance on crypto-asset related investment products, including good practices.[68] Industry participants may install these recommended guidelines in anticipation for legislation. However, regulators lack legislative force to monitor all concerns that may arise.

Australia’s recent approach has been somewhat progressive but there have been inadvertent adverse effects. For example, many banks closed the accounts of cryptocurrency service providers due to compliance fears as a result on AUSTRAC imposing its registration system. Later clarification confirmed that banks were not required to end business relationships. However, this demonstrates the sensitivity and difficulty cryptocurrency businesses are facing with unclear guidance,[69] as well as an acknowledgment that the current framework is incomplete.[70] In December 2021, the Australian Government announced a consultation process to licencing cryptocurrency exchanges and crypto-asset custody requirements.[71] Businesses, investors, and third parties await the outcome of the expected changes.


Cryptocurrencies have many benefits for various industries.[72] To some extent, they have been welcomed and should continue to be encouraged. Their innovative development provides competition to existing forms of money,[73] and can be used for numerous types of transactions.[74] Many firms have already taken up acceptance of Bitcoin with over 100,000 retailers worldwide accepting its use, including multi-nationals such as Dell, Microsoft, some Gucci stores in the US and even a local Queensland farmer for the sale of eggs.[75] The reason behind the popularity of cryptocurrencies is mostly due to their dramatic price shifts.[77] The demand coincided with the global financial crisis, as distrust for traditional banks and government intervention worsened.[78] The profit potential is attractive, and cryptocurrencies have provided a diversified investment opportunity.[79] The industry will create new jobs and economic growth.[80] Bank account are not required and there are no transaction fees.[81] They facilitate international payments.[82] Transfers are almost instantaneous which results in irrevocable transactions due to no middleman processing the transaction.[83] Irrevocable transactions, arguably reduces the potential for disputes.[84] This can be both an advantage and disadvantage depending on which side of the transaction you are on. Transaction costs are relatively inexpensive at around less than 1% compared to around 2.5% for standard credit card processing.[85] No personal information is required to complete a transaction; this is only required to remove government-issued currency from an exchange.[86] However, as will be discussed later, the anonymity comes with risks. Often such features appeal to those involved in illegal activity. Alternative payment methods such as this have knock-on effects on society. For example, peer-to-peer payment systems allow migrants to make cheaper transactions to their families in developing countries, oppressed groups can gain financial privacy, and small companies can avoid traditional bank fees.[87]

In general, stablecoins have lower risks to other cryptocurrencies. Stablecoins are mostly a price-stable cryptocurrency; they rely on differing stabilisation mechanisms as their price is pegged to an asset, such as a government-issued currency or gold.[88] Their objective is to achieve a stable cryptocurrency as they are not designed to provide a return and have little risk of value volatility;[89] thus, stablecoins can be distinguished from other cryptocurrencies.[90] However, although in principle stablecoins avoid some concerns, they have not been without controversy. The example of Tether will be discussed in Part V.

It is undeniable that cryptocurrencies bring many benefits. However, regulators have reason to be cautious about their growth.


There are many potential benefits to the financial and capital markets, but with technological advancement comes new risks and challenges.[91] The cryptocurrency market has been described as a “fertile ground” for crimes.[92] This section will cover some of the main concerns of the market but providing an exhaustive list is beyond the scope of this paper. The lack of consumer protection, fraud and manipulation, the use of cryptocurrencies for illicit purposes and destabilisation of the global economy will all be considered.[93] Although traditional financial markets can experience the legal implications discussed, the cryptocurrency markets are more susceptible.

Most cryptocurrency trading is undertaken by retail investors who are more susceptible to making misinformed investments due to their lack of knowledge and experience.[94] In January 2022, AUSTRAC warned that almost 400 exchanges were “unsafe” for retail investors. [95] The registration system also gives false expectations of security.[96] If an exchange fails and closes, customers can be left with their account balances expunged.[97] Even some high profile Australian exchanges have failed, such as MyCryptoWallet,[98] resulting in investors losing significant funds.[99] Unlike traditional stock exchanges, cryptocurrency exchanges do not have to comply with extensive disclosure obligations and can be established by anyone.[100] Exchanges are not required to maintain a certain percentage of crypto-assets in their possession. This is also known as “cold storage”. Only 60% of large exchanges have external parties conducting their security audits;[101] 65% of smaller exchanges conduct their own audits internally.[102] Evidently, failures are waiting to happen. Despite the significant risk, consumers have limited options of recourse.[103] The regulators and the exchanges themselves warn of the risks, such as who openly warn consumers.[104] Yet ASIC fails to disclose the actual risks in any detail.[105] While the Australian Digital Currency Commerce Association, the peak industry body for cryptocurrencies,[106] warn of the need for awareness, their warnings are not specific.[107] Regulators also currently play a limited role,[108] and uncertainty remains on how to regulate the market.[109]

The speculative nature of activity has resulted in fraud and misinformation.[110] ASIC and the ACCC have both reported the rise in scams.[111] In 2021, AUD $99,000,000 was lost by consumers in Australia to crypto-asset scams.[112] Although ASIC did respond by issuing investor scam alerts,[113] soft measures are insufficient. As discussed, cryptocurrency exchanges are only mandated to have simple checks,[114] with low barriers to entry to the market.[115] This enables participants to start trading with no real understanding or experience. Inexperienced participants means that the market is prone to manipulation and consumers themselves can engage in manipulation without being aware of their actions.[116] Pump and dump groups and Ponzi schemes demonstrate this.[117] A pump and dump scheme involves the coordinated buying, and subsequent promotion, of a large amount of the targeted asset. This short-term increase in demand pushes up the price. Those orchestrating the scheme initially sell out for considerable profit, usually within minutes.[118] When the first price drop appears, participants can panic sell, the price will crash and those who react slowly can experience significant loss.[119] Many pump and dump groups have been created across social media platforms. Ponzi schemes are an investment scam involving paying unsubstantiated returns to investors from the funds of new investors.[120] There are limited or no actual earnings, the schemes rely on funds from new investors. In the USA case of SEC v Shavers, scammers within a Bitcoin forum advertised an “investment opportunity” promising 7% interest per week to investors who loaned bitcoins. New bitcoins were used to pay existing investors.[121] Shavers operated under the name “pirateat40”; the pseudonymous and high level of anonymity aided Shavers to fraudulently operate the “class Ponzi scheme.[122] Some have gone as far as describing Bitcoin as a “quasi-Ponzi” scheme, yet its growing acceptance as a form of payment contradicts this.[123] As cryptocurrencies are becoming more mainstream, investors are less sceptical.[124] The anonymity of users and use of smart contracts also results in fraudsters targeting the markets.[125]

The cryptocurrency market is susceptible to manipulation, due in part to cryptocurrencies not being pegged to a government-issued currency and the fragmented nature of the market. [126] Cryptocurrencies are typically traded on different exchanges,[127] leading to the global price being determined concurrently on multiple exchanges.[128] Inter-exchange dynamics can result in market manipulation of just one exchange, in one jurisdiction, impacting the price of cryptocurrencies across the world.[129] The market can be manipulated through the buying of large volumes then immediately selling, resulting in a price collapse. Once prices have dropped significantly, manipulators buy back in at a lower price and profit off the manipulation.[130] There have been many cases of suspicious activity without market manipulation being confirmed. In 2013, Mt. Gox, the leading Bitcoin exchange at the time, was the subject of suspicious trading over ten months.[131] Although the significant price rise was suspected to be the result of market manipulation,[132] this was not formally established by regulators. [133] The matter was documented and leaked by individuals trading on the platform.[134] Following this, a series of hacks resulted in the company being shut down and Mt. Gox filed for insolvency in 2014. This resulted in over 850,000 Bitcoins were being, including 750,000 which were owned by its customers. At peak value, this would have been worth an approximately $17 billion.[135] The exchange and its customers were left with nothing. The significance of market manipulation should not be underestimated.

Although hacking, exploitation, and distributed denial of service attacks (“DDoS attacks”) occur in traditional markets, the cryptocurrency markets tend to be attractive targets. [136] A DDoS is an intentional attempt to prevent legitimate consumers from using a specific network.[137] Due to large amounts of cryptocurrency being stored in one exchange, it is a target for hackers and can result in consumers losing significant funds.[138] In January 2018, Coincheck, failed to implement adequate protection and reported almost $500,000,000 of NEM coins stolen.[139] Since the attack, new systems alert exchanges when accounts are tagged for stolen funds Criminals also use cryptocurrency exchanges to launder the proceeds of criminal activity.[140] Regulators have prevented numerous attempts at money laundering using cryptocurrency.[141] Digital currencies and encryption, both features of the market, are two “key” enablers of serious organised crime.[142] In traditional banking, payments may be pursued and recovered with relative success. However, this is difficult when stolen funds are used to purchase transferable financial assets.[143] In 2011, the infamous “Silk Road” site, otherwise known as an “eBay for drugs” was established.[144] This was an online marketplace for illicit items. Along with restricted access via TOR network, Bitcoin was used as the payment method to avoid government interference. This criminal innovation was enabled through the online cryptocurrency market allowing users to sell their products worldwide, anonymously, and by-passing regulators.[145]

Cryptocurrency markets are inherently volatile due to there being no liable issuer, and the lack of security also plays a role. [146] The price volatility is emphasised by market speculation.[147] This makes cryptocurrencies appealing as high-risk speculative investments and less appropriate for payment purposes.[148] The appeal has led to many traditional financial institutions moving into the market, predominately hedge funds.[149] Although traditional markets can experience volatility induced by fraud and manipulation, as discussed, the cryptocurrency market has factors that make them more susceptible. The distribution of ownership is skewed towards early investors and high-net worth individuals.[150] In 2017, only 1000 people owned 40% of the market.[151] The market is also fragmented and has low liquidity, making it prone to “flash crashes” resulting in rapid loss of value for consumers.[152] There have even been examples of retail investors taking out loans to purchase cryptocurrencies, which quickly lost value, resulting in significant financial consequences for the individuals.[153]

With the growth of cryptocurrency, the role of financial institutions in fund transfers can be questioned.[154] This poses a risk for financial stability. Cryptocurrency benefits the economy through absorbing surplus government-issued liquidity, reducing inflationary pressures and preventing stock price surges.[155] Yet, this makes it harder for governments to install destructive measures early on without criticism. The International Monetary Fund (‘IMF’) has even discussed the potential of cryptocurrency surpassing traditional currency.[156] Although the cryptocurrency market is not on the same scale as national stock exchanges,[157] there is no doubt that cryptocurrency is already a significant part of the global payment system.[158] Moreover, if cryptocurrencies evolve to become less volatile,[159] this may enable them to compete with central bank currencies. While this would pressure governments issuing national currencies to ensure better policies,[160] it also comes with innate risks. If there was effectively a “parallel” currency, then this would hinder economic stability, the success of monetary policy and financial growth.[161] However, the risk of cryptocurrencies replacing traditional currencies remain small.

Exchanges have also caused significant concern. Tether, the largest and most well-known stablecoin, is just one example of a controversial cryptocurrency.[162] Tether was controlled by Bitfinex, a cryptocurrency exchange creating significant conflict of interest due to the same individuals owning each entity. Tether grew dramatically, with many theories suggesting Bitfinex was printing tokens regardless of demand,[163] inflating the assets value. Following concern from New York state authorities,[164] it was found that iFinex, the operator of Bitfinex, made false statements regarding the backing of the coin.[165] Millions were moved between iFinex and Bitfinex to hide accounts, and Bitfinex failing to provide an audit showing adequate reserves.[166] In addition, Tether was suspected of manipulating Bitcoin prices and diverting proceeds back into Tether’s accounts.[167] Nonetheless, due to the lack of coherent regulations Bitfinex continues to operate, albeit in a limited capacity in some parts of the world.

Despite the negative implications, the crypto market brings many benefits. A total ban of cryptocurrencies would give Australia a lost opportunity of innovation within financial markets. Through effective regulation, management of the issues is possible. To better assess how to effectively regulate cryptocurrencies, approaches in other jurisdictions should be considered.


Across the world, different approaches to regulating cryptocurrency have been taken.[168] Moreover, the rapid surge in cryptocurrency demand has prompted regulators to consider what action they should take. [169] Regulators overseas are also struggling to keep pace with technology and there have been many calls for more legislation. Some countries have banned cryptocurrency trading or initial coin offerings.[170] Others only allow residents to engage in cryptocurrency outside of the country’s borders, such as Qatar and Bahrain. Another approach has been to allow private transactions if they are facilitated by licenced financial intuitions,[171] while others are encouraging friendly regimes or developing their own digital currency. Lastly, some countries have determined the market to be too small to have specific regulation at this stage.[172] Due to the limited scope of this section, this part will focus on the regulatory regimes undertaken in the UK, the USA and APAC. We will consider the UK due to its intention to make the UK a “global cryptoasset technology hub” and recent announcements of a new regulatory scheme;[173] the USA due to its varying approach and mixed messages in the last few years;[174] and the APAC region due to the wide variety of differing approaches.

A The United Kingdom

The regulation of cryptocurrencies in the UK has progressed comparatively slowly. There is no specific legislation that regulates cryptocurrencies. Furthermore, cryptocurrencies are not recognised as a form of legal tender,[175] instead they are treated as property.[176] As a result, case law has demonstrated that freezing orders and interim injunctions are capable of being made.[177] The Financial Conduct Authority (‘FCA’) is the AML/CTF supervisor for UK crypto-asset firms.[178] As a former member of the European Union, there has been progress through The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. This requires private sector firms working in areas at higher risk to money laundering to take a risk-based approach and comply with additional obligations.[179] This requires customer identification and monitoring the use of service. In June 2018, the Fifth Anti-Money Laundering Directive (‘5AML’) was also published.[180] This extended the AML and Counter Terrorism financing rules to virtual currencies and requires new actors to identify their customers and report suspicious activity to the Financial Intelligence Units.[181] The Sixth Anti-Money Laundering Directive (‘6AML’) aims to expand the scope of existing legislation and introduces cybercrimes into the list of offences.[182] While the UK has implemented the 5AML into its national legislation,[183] the 6AML was not implemented. The UK government found that existing legislation was mostly compliant with the 6AML.[184] After leaving the EU in 2020, the UK is expected to follow Brussels by implementing equivalent directives to the EU’s Markets in Crypto-assets (MiCA), E-Money proposal and other AML directives.[185] However, the UK is expected to deviate from EU legislation in the future.

The tax treatment of cryptocurrencies varies and is dependent upon the activities and parties involved.[186] Cryptocurrency’s unique nature leaves the taxability inconclusive and is assessed on an individual basis. The UK has followed the approach of “same risk, same regulatory outcome”.[187] There is a determination to allow an environment where firms can innovate but in a controlled way to ensure consumer protection and confidence in the financial system.[188] Both the FCA and the Bank of England have warned about the use of cryptocurrency and offered guidance. With Australia following suit, the UK’s Prudential Regulation Authority wrote a letter to the UK banks warning of the risks.[189] Created in response to concerns, the joint Cryptoassets Taskforce was established in 2018 to evaluate the risks and benefits of crypto-assets and DLT and advise on regulatory responses.[190]

All cryptocurrency exchanges and cryptocurrency professionals must be registered with the FCA. This has caused significant controversy. The FCA proceeded to ban retail cryptocurrency derivatives, considering these inappropriate for retail consumers due to their market volatility.[191] The Temporary Registration Regime was introduced for existing crypto-asset businesses who were awaiting assessment of their registration applications. This alleviated the FCA’s pressure as they had failed to register firms in a timely manner due to the “complexity” and “standard of applications received”.[192] There have been widespread reports on the failure of the FCA in managing the crypto-asset register, being slow to approve applications and unresponsive.[193]

In January 2022, the HM Treasury announced it will be strengthening the rules on cryptocurrency adverts to better protect consumers from misleading claims.[194] Advertisements of crypto-assets will be brought inside the scope of financial promotions legislation so that higher standards will apply. Again, this legislation focuses on balancing the protection of consumers to ensure that advertisements are “fair, clear and not misleading” with encouraging innovation.[195] Following the ban on stablecoins and call for evidence, the UK is also expected implement regulation to allow stablecoins to be issued or facilitating the use of payment.[196] Likewise to other central banks, the Bank of England and the HM Treasury have announced the possibility of creating their own digital currency.[197] However, similar conclusions to Australia and the USA were found. Specifically, there does not appear to be a “convincing case” to do so.[198] Ultimately, a central bank digital currency could harm financial stability and consumer privacy.

UK regulators appear to have less fear for the risk to the monetary system and more of a drive towards encouragement.[199] Introducing an infrastructure sandbox and working closely with engagement groups and other such measures being pursued are likely to attract investment whilst maintaining a safe market.[200] The new measures taken by the UK should be considered by Australian regulators when developing an effective framework.


In the USA, legislation has treated cryptocurrencies as securities, money, a commodity, and property.[201] State regulation has varied, with some agencies adopting a softer approach than others. The legislation remains uncoordinated. The USA has left some areas of the market over-regulated and others unregulated.[202]

In the USA, The Bank Secrecy Act 1970 (‘BSA’) covers cryptocurrency exchanges.[203] This legislation requires exchange service providers to register with the Financial Crimes Enforcement Network. Service providers must implement AML/CTF programs, maintain records, and give reporting updates. The Securities and Exchange Commission (SEC) consider some cryptocurrencies to fall within the securities market and apply securities law to digital wallets and exchanges.[204] The SEC highlights that referring to something as a currency does not mean it is a currency;[205] this depends on the characteristics and use of the asset. The SEC is critical of the lack of protection and the opportunities for fraud and manipulation.

Contrary to the SEC, the Commodities Future Trading Commission (‘CFTC’) has determined that cryptocurrency should be treated as a commodity.[206] They take a different attitude to the SEC and push for a “do no harm” approach.[207] The CFTC believes that government permission should not be required when developing DLT.[208] They wish to encourage investment and innovation and move away from hindering the market with unduly regulatory burdens.[209] Following an update to the existing Financial Action Task Force Recommendation 16,[210] cryptocurrency exchanges must comply with the “Travel Rule”. This requires exchanges to collect and share data of transactions.[211] This brings virtual currency exchanges under the same regulatory obligations as traditional money transmitters.[212]

A case study of note is TerraUSD, a “stablecoin” plumped in price, despite its supposed ability to maintain value. This has pushes the USA to declare that a regulatory framework for stablecoins will be implemented by year end.[213] Previously, the US was going to introduce the Stable Act 2020.[214] This sort to regulate stablecoins by requiring prospective issuers to obtain a banking charter and obtain approval from the Federal Reserve and appropriate banking agency. However, many voiced concerns that innovation and financial inclusion would be hindered.[215] Balancing the regulatory burden has led to delay with the regulatory framework still incomplete. The US have already announced plans to introduce new compliance responsibilities.[216] It is likely that further plans will follow shortly, with the implementation of a framework for both stablecoins and cryptocurrencies expected.


Other APAC countries outside of Australia have adopted differing approaches.

China played a huge role in the explosive development of cryptocurrencies.[217] At its peak, Chinese exchanges held 98.3% of the Bitcoin trading volume.[218] However, in 2013, the People’s Bank of China (‘PBC’) began to ban domestic cryptocurrency exchanges and initial coin offerings.[219] Cryptocurrencies were considered unable to function as they were not legal tender.[220] Subsequently, the price of Bitcoin dropped to a record low.[221] A similar result was found when South Korea implemented stringent regulations.[222] China also introduced prohibitions to prevent financial risk and to improve investor protection following concern for inflated trading volumes.[223] Exchanges were also found to be giving misleading and false representations.[224] In September 2021, Chinese regulators issued a notice reiterating that cryptocurrency is not legal tender.[225] While it does appear that Chinese regulators will allow the growth of the market soon, the PBC have been developing their own digital government-issued currency, fully back by the government.[226] Although not formally rolled out, the central bank recently launched a pilot version of its wallet app for the digital currency.[227] A closed loop currency, that could scale with demand, would enable regulators to monitor transactions and manage security and price stability.[228] “Closing the door” in China’s approach may have enabled another opportunity for state-owned bank to launch blockchain products.[229] Time will tell if China provides a substitute to cryptocurrencies.

In Japan, a more progressive approach has been taken, with cryptocurrency acting as a legalised form of payment. The ‘Virtual Currency Act 2009 defines cryptocurrencies and sets out that they should be treated as assets for accounting purposes, minimising ambiguity.[230] The legal status of cryptocurrencies in Japan is determined based on the function and use of the cryptocurrency in question.[231] Like other jurisdictions, registration is required of businesses that participate in the market.[232] The introduction of the supervisory body has also been beneficial.[233] Japan experienced a “cryptocurrency boom” and interest continuing to grow.[234] This was due to its swift approach to regulation and focus on being an innovative global leader. Japan is exemplary in its legislation and usage of cryptocurrencies.[235]

Singapore and Hong Kong have positively embraced cryptocurrency, both providing guidance and clarity to businesses to help them navigate the changing regulatory landscape.[236] Tether, for instance, is headquartered in Hong Kong, and is headquartered in Singapore.[237] Both have been actively accommodated by authorities. Although the Hong Kong Monetary Authority (‘HKMA’) wishes to continue engagement, consideration has been given to restrict retail investors in accessing cryptocurrencies. Likewise, the Monetary Authority of Singapore (‘MAS’) has banned advertising to retail customers. Both the MAS and the HKMA have signalled to expect further regulations. On the other hand, Philippine authorities take a more relaxed approach.[238] Transactions are only regulated at the time of conversion from cryptocurrency to government-issued currency. Consumers are encouraged to play-to-earn game, where gaming activity can earn them government-issued currency.[239] The central bank of the Republic of the Philippines has been including more virtual asset providers under its framework. It has provided significantly more clarity than other countries.[240] However, cryptocurrencies are unlikely to become the prevailing payment method as are unlikely to be made legal tender.[241]

As awareness of the risks grow across the APAC region, further restrictions are expected.[242] Like other regions, there is no consensus about the most effective approach. More conservative, risk-adverse countries may implement pro-consumer protection measures whilst others may prioritise growth of the market, letting innovation thrive. At this stage, it is difficult to identify the “best” approach. Time is likely to identify flaws in regulatory frameworks. Yet, the global nature of the market means that a flaw in one jurisdiction may have knock-on effects on the cryptocurrency markets globally.

Overall, the approach around the world to date has been to encourage innovation but concerns are growing. There has been limited legislation in respect of AML/CTF and taxation and blanket prohibitions that tend to target the exchanges or initial coin offerings.[243] Notably, the way in which countries decide to regulate will not only shape the market within their national borders but will impact and develop the global structure.[244] Countries are now in fierce competition with each other to create a successful regulatory framework.[245] Australia should consider the approaches taken in other countries. A carefully considered framework would result in the “economic price”. Namely, Australia needs to consider how to attract industry participants and secure its market position simultaneously.[246]


This part will consider whether regulatory changes are needed and propose some potential options.

Regulation may place an undue burden on technological developments. If countries enforce excessive regulation, trading will simply relocate to other countries. For example, when Chinese regulators implemented a trading ban on Bitcoin, the market grew elsewhere.[247] Cryptocurrencies are intrinsically decentralised and borderless which raises the question whether national regulation could ever be effective.[248] Regulation often comes with significant compliance costs and delays. For example, Commonwealth Bank of Australia (CBA) is facing delays in introducing its first crypto product, the first product of this kind to be offered by an Australian bank. CBA planned to allow its 6.5 million users of its banking app to hold and trade cryptocurrencies. [249] ASIC, using its new design and distribution powers, halted the product due to concerns over consumer protection, product disclosure statement and dissatisfaction around the target market.[250]

Given the growing concerns, regulatory changes in Australia are needed to protect consumers and to prevent criminal activity.[251] Too many consumers are being put at risk. Soon exchanges will become more powerful so the impact of any loss will worsen. For example,, a registered Australian exchange fell into administration in 2021. Investors lost access to assets and cash amounting to as much as $10 million.[252]

It is not just consumers that are calling for regulatory change but also industry players to boost market credibility and consumer confidence.[253] Cryptocurrencies are unlikely to disappear and therefore a coherent legislative framework is required.[254] The developments in Australia have led to piecemeal legislation which is challenging to navigate.[255] This has left gaps of uncertainty. Although additional legislation may create temporary instability in value, and is likely to raise compliance costs, this is necessary due to the growing concerns. Transparency and planning regarding new legislation will minimise compliance costs and give industry players time to assess impact on their business. However, additional legislation should avoid hindering market growth,[256] and the lack of global coordination should not impede intervention.[257] Although, if a consistent international approach is taken this would be desirable.[258] This could perhaps be possible using the International Organisation of Securities Commissions.[259] Regulators need to encourage investment and build a trustworthy market.[260] However, it is uncertain how achievable this is. To date the Senate Select Committee of Australia as a Technology and Financial Centre, the Parliamentary Joint Committee on Corporations and Financial Services (PJC) Inquiry into Mobile Payments and Digital Wallets and the Payments System Review have all recommended change.[261] The case for regulatory changes outweighs maintaining the status quo.

Australia should consider the approaches taken in other jurisdictions but also be proactive in establishing a regulatory framework. Regulators are likely focus on regulating conversion points and intermediaries and establishing or supporting a closed loop currency.[262] In late 2021, plans were announced for significant payment reforms.[263] In March 2022, the Australian Government’s Treasury released its consultation paper and proposals for a regulatory model. This was to include the introduction of a tailored licensing framework for Australian crypto-asset secondary service providers and crypto custody requirements that would enhance protection for the buying and selling of crypto-assets.[264] The broader category of crypto-asset secondary service provider compared with “digital currency exchange” is at the centre of future legislation.[265] The AML/CTF Act has already been amended to target digital currency exchanges; exchanges are merely a subset of bodies that provide consumer services within the cryptocurrency market. The proposals for the future include custody services, brokerage services and dealers.[266] These entities have all been identified as playing a role in the possible loss of a customer’s balance or assets; therefore, it would be beneficial to broaden the category so more industry players are caught under a legislative framework.

Regulators should provide consumers with some form of “stamp of quality” for cryptocurrency businesses.[267] This would provide consumers with the ability to distinguish between trustworthy, high-quality service providers and those that fail to offer this through a licensing regime.[268] A new regime should also avoid making service providers subject to regulatory duplication.[269] The Treasury has proposed a minimum standard of conduct attached to a licensing framework. This would include custody for private keys and an assessment of suitability of key persons.[270] A licensing regime could ensure other obligations are met, such as adequate technology, minimum financial requirements, regular auditing by independent actors and a breach of AML/CTF obligations resulting in the possibility of licence removal.[271] A licensing model would allow for tailored legislation and avoid a one-size-fits-all approach.

Alternative to a licensed regime, regulation could take place under the financial services regime.[272] However, this approach would come with its own challenges. This could be done by defining crypto-assets as “financial products” in legislation under the Corporations Act.[273] ASIC is likely to be considered the most appropriate regulator as its regulatory powers position it the best.[274] Flexibility could be offered; regulators could have the ability to exclude cryptocurrencies as “financial products” if this is appropriate.[275] However, this approach may hinder innovation due to the likely high compliance costs and onerous obligations, delays awaiting exclusion and inappropriate market players being caught in this provision.[276] Alternatively, another approach that could be considered is self-regulation through the implementation of a code of conduct. This could be used on both secondary service providers and for the safeguarding of private keys. For example, the Global Digital Finance Principles for Token Trading Platforms and Australian Digital Currency Code of Conduct act in a similar way.[277] This approach would be like those in the UK and the USA. However, given the demand in these countries for additional obligations this approach is unlikely to be sufficient. Although it is worth considering if cryptocurrencies should all be considered “financial products” under the Corporations Act and regulated as such, the principles behind regulating crypto-assets differ to financial products.[278] The obligations that would then apply could be too onerous.[279] Rather than forcing a one-size-fits-all approach, a separate regime would better regulate the market. The Treasury has also considered having an Australian Central Bank digital currency to enable Australia to stay updated with technological advances.[280] Encouraging national banks to adopt stablecoins would also be a safe alternative that may be considered.[281]

Creating a successful regulatory framework is challenging given the intangible, fragmented and international scale of the cryptocurrency market.[282] Enforcing legislative requirements on large international providers will be no easy feat. However, the focus should be on benefiting national providers and their consumers from a more consistent and trustworthy landscape.[283] The government has encouraged industry participants to engage and comment on the consultation proposals.[284] Encouragement of participation is a positive sign. This indicates the government’s approach to work alongside industry, with the aim not to destroy the market but to strike an appropriate balance of regulation. After all, the implementation of regulation may not necessarily result in a downturn of the market.[285] In some respects, price responses to date indicate a liking for a defined legal status.[286]


It is possible to create a safer and universally used cryptocurrency market, but the government must act quicky to implement an appropriate framework.[287] Cryptocurrencies were once considered as an outlying investment opportunity. It is now becoming rapidly mainstream.[288] The regulatory landscape does not appear to be steadying. As this paper was being prepared, it was announced that the Central African Republic had approved Bitcoin as legal tender.[289] This is only the second country to do so after El Salvador. However, the decision was heavily criticised by the IMF due to concerns that this would bring instability and inflation.[290] Regardless of the concerns for consumers, the number of market participants continues to grow.[291] This is likely to be due to the willingness to ignore the risks or simply due to naivety.[292]

Australia has demonstrated an intent to provide an operational framework. Regulators will need to balance encouraging competition and innovation against protecting consumers. To date, innovation has been prioritised. This is meaningless to those who have lost significant sums due to no fault of their own. Even during completing this paper, the cryptocurrency market continued to hit headlines; values plummeted, cryptocurrency exchanges faced massive security threats and new regulations were implemented. Evidently, the “wait and see” approach to digital disrupters needs to change.[293] Regulation should not be avoided due to its complexity. Regulators must rise to the challenge.

[1] Financial Stability Board, Assessment of Risks to Financial Stability from Crypto-assets (16 February 2022) < > 1.

[2] Independent Reserve, Cryptocurrency Index (2021) < > 7 (‘Independent Reserve’).

[3] Freeman Law, Legal Issues Surrounding Cryptocurrency (15 November 2020) < >; The Treasury, Federal Treasurer Josh Frydenberg, Joint Media Release: Reforming Australia’s payments system for the digital age (December 2021) < > (‘Frydenberg’).

[4] Mark Carney, FSB Chair’s Letter to G20 finance ministers and Central Bank Governors (13 March 2018) < >.

[5] Anastasia Sotiropoulou and Dominique Guégan, ‘Bitcoin and the Challenges for Financial Regulation’ (2017) 12(4) Capital markets law journal 466, 466 (‘Sotiropoulou & Guégan’).

[6] Yuliia Chornous et al, ‘Legal Regulation of Cryptocurrency Turnover in Ukraine and the EU’ (2019) 22(2) Journal of legal, ethical and regulatory issues 1, 1.

[7] Usman W Chohan, ‘Assessing the Differences in Bitcoin & Other Cryptocurrency Legality Across National Jurisdictions’ SSRN Electronic Journal 1.

[8] Sotiropoulou & Guégan, p.467.

[9] John Griffin and Amin Shams, ‘Is Bitcoin Really Untethered?’ (2020) 75 The Journal of Finance 1, 1 (‘Griffin & Shams).

[10] Ibid.

[11] Australian Government, The Treasury, Crypto asset secondary service providers: Licensing and custody requirements (21 March 2022) < > 16 (‘The Treasury’).

[12] Louise Parsons, ‘Bitcoin : Consumer Protection and Regulatory Challenges’ (2016) 27(3) Journal of banking and finance law and practice 184, 192 (‘Parsons’).

[13] Bolotaeva, OS, AA Stepanova and SS Alekseeva, ‘The Legal Nature of Cryptocurrency’ (2019) 272(3) IOP Conference Series: Earth and Environmental Science 32166, 1 (‘Bolotaeva’); Ibrahim Kulunk, ‘Cryptocurrency and Crypto Money Markets in COVID-19 Period’ in Cagatay Basarir and Burak Darici, Financial Systems, Central Banking, and Monetary Policy During COVID-19 Pandemic and After (Lexington Books, 2021) 65 (‘Kulunk’); Vivian A Maese et al, ‘Cryptocurrency: A Primer’ (2016) 133(8) Banking Law Journal 468, 468 (‘Maese’).

[14] Bolotaeva, p.1

[15] Parsons, p.192.

[16] Carol Alexander and Douglas Cumming, Corruption and Fraud in Financial Markets: Malpractice, Misconduct and Manipulation (John Wiley & Sons, 2020) 206 (‘Alexander & Cumming’).

[17] Maese, p.468.

[18] Kulunk, p.65; Reserve Bank of Australia, Cryptocurrencies (2022) < > (‘RBA’).

[19] RBA.

[20] Raphael Auer and Claessens, Stijn, ‘Regulating Cryptocurrencies: Assessing Market Reactions’ (2018) BIS Quarterly Review September 51, 52.

[21] David Lucking and Vinod Aravind, ‘Cryptocurrency as a Commodity: The CFTC’s Regulatory Framework’ (2020) < file:///C:/Users/brion/Downloads/Global%20Legal%20Insights%20Guide%20-%20Cryptocurrency%20as%20a%20Commodity%20The%20CFTCs%20Regulatory%20Framework.pdf > 1 (Lucking & Aravind’).

[22] Mykola Inshyn, Leonid Mohilevskyi and Oleksii Drozd, ‘The Issue of Cryptocurrency Legal Regulation in Ukraine and all over the World: A Comparative Analysis’ (2018) 4(1) Baltic Journal of Economic Studies 169, 170 (Inshyn’).

[23] Hall & Wilcox, Cryptocurrencies and ICOs – the new legal challenges (10 October 2017) < > (‘Hall’).

[24] Alexander & Cumming, p.207

[25] Alexander & Cumming, p.206.

[26] Parsons, p.184.

[27] Susan Alkadri, ‘Defining and Regulating Cryptocurrency: Fake Internet Money or Legitimate Medium or Exchange?’ (2018) 17(1) Duke law and technology review 71, 71 (‘Alkadri’).

[28] Kulunk, p.68; Hall.

[29] The Treasury, p.6.

[30] Income Tax Assessment Act 1997 (Cth) s 108-5.

[31] Australian Government, The Treasury, GST – removing the double taxation of digital currency (26 July 2017) <> (‘The Treasury, 2017’); Treasury Laws Amendment (Measures 4 for a later sitting) Bill 2017: GST treatment of digital currency.

[32] The Treasury, 2017.

[33] Australian Government AUSTRAC, New Australian laws to regulate cryptocurrency providers (11 April 2018) < > (‘AUSTRAC, 2018’).

[34] Anti-Money Laundering and Counter-Terrorism Financing Act 2018 (Cth); Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (Cth).

[35] Anti-Money Laundering and Counter-Terrorism Financing Act 2018 (Cth) Part 6.

[36] Peter Soros, AUSTRAC (Speech) in Asha Barbaschow, Anti-money laundering regulation for all crypto exchanges on Austrac's wish list (May 2021) < >.

[37] AUSTRAC, 2018.

[38] Anti-Money Laundering and Counter-Terrorism Financing Act 2018 (Cth) Division 2; Anti-Money Laundering and Counter-Terrorism Financing Act 2018 (Cth) s76A.

[39] Nicole Rose, AUSTRAC, (Speech) in Asha Barbaschow, Anti-money laundering regulation for all crypto exchanges on Austrac's wish list (May 2021) < >.

[40] Parsons, p.184.

[41] Ibid, p.185.

[42] Parsons, p.184; Australian Banking Association, Banking Code of Practice (5 October 2021) < > (‘ABA’); Australian Securities & Investment Commission, ePayments Code (29 March 2016) < >.

[43] Parsons, p.200; Australian Financial Complaints Authority, Investments and financial advice products and issues (2022) <,of%20their%20voluntary%20industry%20code. >.

[44] Jade McGlynn and Michael Bacina, The agony of ACX Exchanges customers continues (5 March 2021) < >; Financial Review, Collapse of crypto platform a cautionary tale (1 March 2021) < > (‘AFR’).

[45] Corporations Act 2001 (Cth) s 9; Corporations Act 2001 (Cth) Chapter 7; Australian Securities and Investments Commission Act 2001 (Cth) s 12BA(1); Australian Securities and Investments Commission Act 2001 (Cth) s 12BA.

[46] The Treasury, p.7.

[47] Australian Securities & Investments Commission, Crypto-assets (October 2021) <> (‘ASIC, Crypto-assets’); Howard Rapke, What’s in store for Australia’s cryptocurrency market in 2022? (9 February 2022) <,providers%20to%20register%20with%20AUSTRAC. > (‘Rapke’).

[48] Parsons, p.193.

[49] Rapke.

[50] The Senate, Economic References Committee, Digital Currency – game changer or bit player (August 2015) < > 43 (‘Senate’).

[51] Ibid.

[52] The Treasury, p.7.

[53] ASIC Class Order [13/1409]; ASIC Class Order 13/1410; Australian Securities and Investments Commission Corporations Act 2001; Australian Securities & Investments Commission, RG 133 Funds management and custodial services: Holding assets (31 July 2018) < >.

[54] The Treasury, p.7.

[55] Corporations Act s 763A; Corporations Act Chapter 7; Competition and Consumer Act 2010 (Cth) Schedule 2; Competition and Consumer Act 2010 (Cth) Chapter 3 Part 3-2 Division 1.

[56] Competition and Consumer Act 2010 (Cth) s 18.

[57] Parsons, p.196.

[58] Competition and Consumer Act 2010 (Cth) Schedule 2 s 2(1); Alex Bruce, Consumer Protection in Australia (Lexis Nexis, 2nd ed 2014) 238.

[59] Ibid.; Parsons, p.194.

[60] Sykes v Reserve Bank of Australia (1997) 151 ALR 579, 592.

[61] Parsons, p.195.

[62] Parsons, p.195.

[63] Competition and Consumer Act 2010 (Cth) s 243.

[64] Parsons, p.195; Competition and Consumer Act 2010 (Cth) Chapter 5 Part 5-2 Division 4.

[65] Parsons, p.195; Clark v Macourt [2013] HCA 56; (2013) 253 CLR 1.

[66] Auer, p.52.

[67] Ibid.

[68] Australian Securities & Investments Commission, 21-285MR ASIC releases guidance on crypto-asset related investment products (29 October 2021) < >; Australian Securities & Investments Commission, Exchange traded products: Admission guidelines (October 2021) < >; ASIC, Crypto-assets.

[69] Alkadri, p.71.

[70] Australian Securities & Investments Commission, Regulating crypto-asset–based investment products within the financial services framework: Speech by Commissioner Cathie Armour at the AFR Cryptocurrency Summit (6 April 2022) < > (‘Armour’).

[71] The Treasury, p.2.

[72] HM Treasury, UK Regulatory Approach to Cryptoassets and Stablecoins: Consultation and Call in for Evidence (January 2021) < > 2 (‘HM Treasury’).

[73] Vora Gautam, ‘Cryptocurrencies: Are Disruptive Financial Innovations Here?’ (2015) 06(07) Modern Economy 816, 816.

[74] Sotiropoulou & Guégan, p.467.

[75] Marty McCarthy, Queensland Egg Farmer Lays the Foundations for Agriculture Bitcoin Economy (ABC Rural, 17 November 2015) <> Jonas Chokun, Who Accepts Bitcoin as Payment: List of Companies, Stores, Shops (19 June 2016) <> Anthony Cuthbertson, Bitcoin now accepted by 100,000 merchants worldwide (February 2015) < > (‘Cuthbertson’); BBC News, Gucci Stores to accept cryptocurrencies in the US < >.

76 Cuthbertson.

[77] Auer, p.52.

[78] Charles P Kindleberger, Manias, Panics, and Crashes : a History of Financial Crises (Basic Books, Rev. ed., 1989) 2 (‘Kindleberger’).

[79] David Kuo Chuen Lee, Li Guo and Yu Wang, Cryptocurrency: A new investment opportunity? (2018) 20(3) Journal of Alternative Investments 16, 17.

[80] Financial Review, No new regulatory requirements for crypto: APRA (7 April 2022) < >.

[81] Maese, p. 469.

[82] Marc Andreessen, Why Bitcoin Matters (January 2014) <> .

[83] Louise Hayward, What is the legal status of cryptocurrency in the UK? (September 2021) < > (‘Hayward’).

[84] Maese, p. 469.

[85] Ibid.

[86] Ibid.

[87] Lawrence Trautman and Alvin C Harell, ‘Bitcoin versus Regulated Payment Systems, What Gives?’ (2017) 38 Cardozo Law Rev 1041, 1067.

[88] Alexander & Cumming, p.239; Dirk Bullmann, Jonas Klemm and Andrea Pinna, ‘In Search for Stability in Crypto-Assets: Are Stablecoins the Solution?’ SSRN Electronic Journal 3 (‘Bullmann’).

[89] Igor Makarov and Antoinette Schoar, ‘Price Discovery in Cryptocurrency Markets’ (2019) 109 AEA papers and proceedings 97, 98; Alexander & Cumming, p.239.

[90] Bullmann, p.3

[91] HM Treasury, p.3.

[92] Jiahua Xu and Benjamin Livshits, The Anatomy of a Cryptocurrency Pump-and-Dump Scheme (2019) <> 1 (‘Xu & Livshits’).

[93] Sotiropoulou & Guégan, p.466; Alkadri, p.71; Jay Clayton; J. Christopher Giancarlo, ‘Regulators Are Looking at Cryptocurrency; At the SEC and CFTC, We Take Our Responsibility Seriously’, The Wall Street journal. Eastern edition (New York, N.Y, 2018) (‘Clayton’).

[94] Alkadri, p.71-72; Clayton.

[95] Financial Review, AUSTRAC battles crypto crime ‘blind spots’ (January 2022) < >.

[96] Ibid.

[97] Tyler Moore and Nicolas Christin, ‘Beware the Middleman: Empirical Analysis of Bitcoin-Exchange Risk’ in Financial Cryptography and Data Security (Springer Berlin Heidelberg, 2013) 25, 25 (‘Moore & Christin’).

[98] The Treasury, p.13.

[99] The Treasury, p.13.

[100] Alexander & Cumming, p.214.

[101] Garrick Hileman and Michel Rauchs, Global Cryptocurrency Benchmarking Study (April 2017) < > 27.

[102] Ibid.

[103] Australian Securities & Investment Commission, Episode 65: Crypto-assets for first time investors (25 June 2021) < >.

[104] Bitcoin, Some Things You Need to Know (2022) < >.

[105] Parsons, p.190.

[106] Kreab & Gavin Anderson Worldwide, Australian Digital Currency Commerce Association Submission to the Senate Economics References Committee Inquiry into Digital Currency (November 2014) < file:///C:/Users/brion/Downloads/15.pdf > 3.

[107] Australian Digital Commerce Association, Australian Digital Commerce Association Response to Treasury Consultation Paper on Initial Coin Offerings (February 2019) < > (‘ADCA’); Parsons, p.190.

[108] Rapke.

[109] Alkadri, p.71.

[110] Griffin & Shams, p.2; Kindleberger.

[111] Australian Securities & Investments Commission, Scam alert: ASIC sees a rise in crypto scams (June 2021) < > (‘ASIC, 2021, Scam Alert’); Australian Competition & Consumer Commission, Australians lose over $70 million to bogus investment opportunities (August 2021) < >.

[112] Ibid.

[113] ASIC, 2021, Scam Alert.

[114] Parsons, p.194

[115] Alexander & Cumming, p.211

[116] Ibid, p.214.

[117] Ibid.

[118] Xu & Livshits, p.3.

[119] Alexander & Cumming, p.214; Xu & Livshits, p.2-3.

[120] SEC, Investor Alert: Ponzi schemes Using virtual Currencies Ponzi Schemes Generally (2017) SEC publication No. 153 (7/13) < > 1 (‘SEC’).

[121] SEC, p.2; SEC v. Shavers, et. al. 2013 U.S. Dist. LEXIS 130781 (E.D. Tex., Sept. 18, 2014).

[122] EV Murphy, MM Murphy and MV Seitzinger, Bitcoin: Questions, Answers, and Analysis of Legal Issues (Congressional Research Service, 13 October 2015) 3; Parsons, p.185.

[123] Paul Latimer and Michael Duffy, Deconstructing Digital Currency and Its Risks: Why ASIC Must Rise to the Regulatory Challenge (2019) 47(1) Federal Law Review 121, 122; Martin Arnold, Bitcoin a “Bubble, Ponzi Scheme and Environmental Disaster (February 2018 < >.

[124] Ibid, p.1.

[125] Massimo Bartoletti et al, ‘Dissecting Ponzi Schemes on Ethereum: Identification, Analysis, and Impact’ (2020) 102 Future generation computer systems 259, 260-261, 263.

[126] Alexander & Cumming, p.211; Kulunk, p.67.

[127] Alexander & Cumming, p.211.

[128] Morten Brandvold et al, ‘Price Discovery on Bitcoin Exchanges’ (2015) 36 Journal of international financial markets, institutions & money 18, 19.

[129] Alexander & Cumming, p.211.

[130] Alexander & Cumming, p.232.

[131] Gandal, p.86.

[132] Gandal, p.87.

[133] Ibid, p.89.

[134] Anonymous, The Willy Report: proof of massive fraudulent trading activity at Mt. Gox, and how it has affected the price of Bitcoin (2014) < >; Anonymous, Peter Rs theory on the collapse of Mt. Gox (2014) <

mt_gox/ >.

[135] Ledger, Hack Flashback: The Mt. Gox Hack – The Most Iconic Exchange Hack (February 2019) < >.

[136] Alexander & Cumming, p.224.

[137] Georgios Loukas and Gülay Öke, ‘Protection Against Denial of Service Attacks: A Survey’ (2010) 53(7) Computer journal 1020, 1020.

[138] Alexander & Cumming, p.224, p.247.

[139] Ibid, p.225.

[140] Ross Anderson, Closing the Phishing Hole – Fraud, Risk and Nonbanks (2007) < > 16 (‘Anderson’).

[141] Daniel Dupuis and Kimberly Gleason, ‘Money Laundering with Cryptocurrency: Open Doors and the Regulatory Dialectic’ (2020) 28(1) Journal of Financial Crime 60, 61.

[142] Nick Karagiannis et al., Anti-money Laundering and Counter Terrorism Financing Requirements

Extended to Cryptocurrency Exchanges (2018) 37(1) Communications Law Bulletin 25, 25.

[143] Anderson, p.9.

[144] Judith Aldridge and David Décary-Hétu, ‘Not an 'Ebay for Drugs': The Cryptomarket 'Silk Road' as a Paradigm Shifting Criminal Innovation’ (2014) SSRN Electronic Journal 1, 1 (‘Aldridge & Décary-Hétu’); David Adler, ‘Silk Road: The Dark Side of Cryptocurrency’ (2018) Fordham Journal of Corporate and Finance Law 1.

[145] Aldridge & Décary-Hétu, p.2; James Ball et al, FBI Claims Largest Bitcoin Seizure after Arrest of Alleged Silk Road Founder (October 2013) < >.

[146] Bullmann; Deloitte, A Middle-East Point of View: Regulating Currencies (2018) < > 51 (‘Deloitte’).

[147] Alexander & Cumming, p.231.

[148] HM Treasury, p.5.

[149] Alexander & Cumming, p.209

[150] Alexander & Cumming, p.232; Moore and Christin.

[151] Olga Kharif, The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market (December 2017) < >.

[152] Alexander & Cumming, p.233; Leon Pick, Volatility Returns: Bitcoin Price Plunges over 13% to 2-Month Low (August 2015) <> .

[153] e.g. Frank Chung, Investor takes out $127,000 loan to buy cryptocurrency, loses 85 per cent (August 2018) < >; Nick McLaren, Bitcoin scam sees man lose nearly half a million dollars, calling banks and exchanges to account (April 2021) < > ; Michael Kaplan, Bitcoin crash: This man lost his savings when cryptocurrencies plunged (September 2018) < >.

[154] Sotiropoulou & Guégan, p.466.

[155] Zoltan Ban, Cryptocurrencies Risk World-Wide Government Action Thanks to Their Success < >.

[156] International Monetary Fund, The Rise of digital Money – A Strategic Plan to Continue Delivering on the IMF’s Mandate (July 2021) < file:///C:/Users/brion/Downloads/PPEA2021054.pdf > 12.

[157] Neil Gandal et al., ‘Price Manipulation in the Bitcoin Ecosystem’ (2018) 95 Journal of monetary economics 86, 87 (‘Gandal’).

[158] Ibid.

[159] Gregory Claeys, Maria Demertzis, Konstantinos Efstathiou, (2018) Cryptocurrencies and monetary policy, Bruegel Policy Contribution (2018) Bruegel Policy Contribution No. 2018/10 < > p.2.

[160] Ibid.

[161] Ibid.

[162] Alexander & Cumming, p.239.

[163] Griffin and Shams, p.3; Michael Kapilkov, Bitfinex Is Constantly Printing More Tether, None Of It Has Ever Been Burned (May 2020) < >.

[164] CNBC, ‘Cryptocurrency firms Tether and Bitfinex agree to pay $18.5 million fine to end New York probe’ (23 February 2021) < >.

[165] NY State Office of the Attorney General, Attorney General James Ends Virtual Currency Trading Platform Bitfinex’s Illegal Activities in New York (23 February 2021) < >.

[166] Timothy B. Lee, Funny Money — Why experts are worried about Tether, a dollar-pegged cryptocurrency (August 2018) < >.

[167] Timothy F. Peterson, To the Moon: A history of Bitcoin Price Manipulation (2021) 13(2) Journal of Forensic and Investigative Accounting 254, 254; Griffin & Amin Shams, p.1913.

[168] John Riley, ‘The Current Status of Cryptocurrency Regulation in China and Its Effect Around the World’ (2021) 7(1) China and WTO review 135, 139 (‘Riley’).

[169] Kulunk, p.66.

[170] Riley, p.139 (e.g. Pakistan, Morocco, Algeria, Bolivia, Vietnam and Negal).

[171] Ibid (e.g. Bangladesh, Iran, Thailand, Lithuania, Lesotho, China, and Colombia).

[172] Ibid (e.g. Belgium, South Africa).

[173] GOV.UK, Government sets out plan to make UK a global cryptoasset technology hub (April 2022) < > (‘GOV.UK, April 2022’).

[174] Ryan Haar, U.S. Officials Send Mixed Messages on Crypto Regulation. Here’s What It All Means for Investors (April 2022) < >.

[175] Hayward.

[176] UK Jurisdiction Taskforce, QC Lawrence Akka, Legal Statement on Cryptoassets and Smart Contracts (November 2019) < > 9; AA v Persons Unknown ([2019] EWHC 3556).

[177] AA v Persons Unknown ([2019] EWHC 3556); Hayward.

[178] Financial Conduct Authority, FCA Establishes Temporary Registration Regime for Cryptoasset Businesses (December 2020) < >.

[179] The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (UK).

[180] Fifth Anti Money Laundering Directive (Directive (EU) 2018/843).

[181] European Commission, Strengthened EU rules to prevent money laundering and terrorism financing (9 July 2018) < file:///C:/Users/brion/Downloads/factsheet_amld_2018_07_2_ED0F5F0A-B993-3EA5-D634230D39AE7CF5_48935.pdf >.

[182] Sixth Anti-money Laundering Directive (Directive (EU) 2018/1673).

[183] HM Treasury, Transposition of the Fifth Money Laundering Directive: April 2019 consultation (April 2019) < > ;

[184] Elizabeth Robertson and Zahra Mashhood , Recent AML Enforcement Trends in the UK (April 2021) < >.

[185] Comply Advantage, Is Cryptocurrency Legal in the UK? (2022) < >.

[186] GOV.UK, Cryptoassets Manual (30 March 2021) < >.

[187] HM Treasury, p.2.

[188] HM Treasury, p.2.

[189] Bank of England Prudential Regulation Authority, Existing or planned exposure to crypto-asset (June 2018) < >.

[190] GOV.UK, Cryptoassets Taskforce: final report (30 July 2018) < >.

[191] Financial Conduct Authority, FCA Bans the Sale of Crypto-Derivatives to Retail Consumers (October 2020) < >.

[192] Ibid.

[193] Ryan Browne, ‘A total disaster’: Crypto firms face being booted from the UK as a key deadline approaches (March 2022) < >.

[194] GOV.UK, Government to Strengthen Rules on Misleading Cryptocurrency Adverts (January 2022) < >.

[195] Ibid.

[196] GOV.UK, UK regulatory approach to cryptoassets and stablecoins: consultation and call for evidence (7 January 2021) < >.

[197] Bank of England, Bank of England statement on Central Bank Digital Currency (April 2021) < >.

[198] UK Parliament, Central bank digital currencies: a solution in search of a problem? Report published (January 2022) < >.

[199] Inshyn, 172.

[200] GOV.UK, April 2022.

[201] Carol Goforth, US Law: Crypto is Money, Property, a Commodity, and a Security, all at the Same Time (December 2018) < >.

[202] Rain Xie, ‘Why China had to “Ban” Cryptocurreny but the U.S. did not: A comparative analysis on regulations on crypto markets between the U.S. and China (2019) 18(2) Washington University global studies law review 457, 458 (‘Xie’).

[203] The Currency and Foreign Transactions Reporting Act 1970 (US) (commonly referred to as the Bank Secrecy Act).

[204] US. Securities and Exchange Commission, Statement on Cryptocurrencies and Initial Coin Offerings (December 2017) < > (‘USEC’); US. Securities and Exchange Commission, Statement on Potentially Unlawful Online Platforms for Trading Digital Assets < >.

[205] USEC.

[206] Lucking & Aravind, p.2.

[207] Commodity Futures Trading Commission, Special Address of CFTC Commissioner J. Christopher Giancarlo Before the Depository Trust & Clearing Corporation 2016 Blockchain symposium (29 March 2016) < >; Jenny E Cieplak and Conner Griffith, ‘Cryptocurrency and Initial Coin Offerings: Despite a Plethora of Regulators, Gaps Remain’ (2018) 37(4) Banking & Financial Services Policy Report 1, 3.

[208] Ibid.

[209] Ibid.

[210] Financial Task Action Force, International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation (March 2022) < >.

[211] Ibid, Recommendation 16; Bank Secrecy Act (BSA) 1970 rule [31 CFR 103.33(g)].

[212] Comply Advantage, Cryptocurrency Regulations Around the World (2022),submit%20reports%20to%20the%20authorities >.

[213] Steven Ehrlich, Unstable Stablecoin: How Crypto’s Crash Broke The Buck For TerraUSD (May 2022) < >; Bloomberg Law, Yellen Cites UST Breakdown While Calling for Stablecoin Rules (May 2022) < >.

[214] Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act 2020.

[215] John Adams, The not-so-stable state of stablecoin regulation (December 2021) < >.

[216] Federal Register, Threshold for the Requirement To Collect, Retain, and Transmit Information on Funds Transfers and Transmittals of Funds (October 2020) < >.

[217] Riley, p.136.

[218] Ibid, p.135; Alexander & Cumming, p.217.

[219] Alun John, Samuel Shen and Tom Wilson, China’s Top Regulators Ban Crypto Trading and Mining, Sending Bitcoin Tumbling (September 2021) < >.

[220] Xie, p.478.

[221] Yun Li, Bitcoin sinks to lowest level since May, falling $3,000 in a month as China accelerates crackdown (November 2019) < >.

[222] Evelyn Cheng, Bitcoin briefly falls 11% after South Korea moves to ban new cryptocurrency trading accounts (December 2017) < >.

[223] Richard Hoffmann, China’s Cryptocurrency and Blockchain Regulatory Environment (2020) < >.

[224] Alexander & Cumming, p.217; Dirk G Baur and Thomas Dimpfl, ‘Realized Bitcoin Volatility’ SSRN Electronic Journal.

[225] The People’s Bank of China, Notice on Further Preventing and Resolving the Risks of Virtual Currency Trading and Speculation (September 2021) <> .

[226] Riley, p.140; The People’s Bank of China, Progress of Research & Development of E-CNY in China (July 2021) <> .

[227] Arjun Kharpal, China launches app for its own digital currency as it looks to expand usage (January 2022) <,China's%20central%20bank%20has%20launched%20a%20pilot%20version%20of%20a,wallet%20and%20spend%20the%20currency. >.

[228] Deloitte, p.51.

[229] Xiu, p.487.

[230] Settlement of Funds (Act No. 59 of 2009, as amended, the Amended Settlement Act); Law Library of Congress, Regulation of Cryptocurrency: Japan (2014) < >.

[231] Ken Kawai, Takeshi Nagase and Huan Lee Tan, The Virtual Currency Regulation Review: Japan (September 2021) <,Payment%20Services%20Act%20(PSA). >.

[232] Ibid.

[233] Inshyn, p.173

[234] Ibid.

[235] Ibid.

[236] EIU Viewpoint, Cryptocurrency regulation diverges across Asia (February 2022) < > (‘EIU’).

[237] Business Insights Global, Cryptocurrency Regulation Diverges Across Asia (2022) < file:///C:/Users/brion/Downloads/19054624_48884486820001731.pdf > (‘BIG’).

[238] Ibid.

[239] BIG, p.4.

[240] EIU.

[241] BIG, p.4.

[242] Ibid.

[243] Latimer & Duffy, p.126.

[244] Riley, p.135.

[245] ADCA, p.2.

[246] Ibid.

[247] Joseph Young, How Chinese Bitcoin Buyers Are Getting Around Government Ban (January 2018) < >.

[248] Auer, p.52.

[249] Financial Review, Commonwealth Bank crypto app faces ASIC hurdle (April 2022) <'s%20pilot%20to%20allow%20users,sources%20familiar%20with%20the%20process. >.

[250] Financial Review, Commonwealth Bank crypto app faces ASIC hurdle (April 2022) <'s%20pilot%20to%20allow%20users,sources%20familiar%20with%20the%20process. >.

[251] Alkadri, p.75.

[252] AFR.

[253] The Treasury, p.4.

[254] Parsons, p.184.

[255] Parsons, p.184.

[256] Parsons, p.184.

[257] Auer, p.53.

[258] Latimer & Duffy, p.132.

[259] Kevin V Tu and Michael W Meredith, ‘Rethinking Virtual Currency Regulation in the Bitcoin Age’ (2015) 90 Washington Law Review 271.

[260] The Treasury, p.3.

[261] Senate; Parliamentary Joint Committee on Corporations and Financial Services, Mobile payment and digital wallet financial services, final report (October 2021) <;fileType=application%2Fpdf > ; The Treasury, Review of the Australian Payments System, final report (June 2021) < >.

[262] Deloitte, p.51.

[263] Frydenberg.

[264] Armour; The Treasury, p.2.

[265] The Treasury, p.10.

[266] Ibid.

[267] Ibid, p.4.

[268] Ibid, p.14.

[269] Ibid.

[270] Ibid, p.6.

[271] The Treasury, p.16-17.

[272] Ibid, p.18.

[273] Ibid; Corporations Act 2001 (Cth) s 764A.

[274] Latimer & Duffy, p.132.

[275] Ibid, p.18.

[276] Ibid.

[277] Ibid, p.19.

[278] Ibid, p.12-13.

[279] Corporations Act 2001 (Cth); Australian Securities and Investments Commission Act 2001.

[280] Reserve Bank of Australia, The Future of Payments: Cryptocurrencies, Stablecoins or Central Bank Digital Currencies? (18 November 2021) < >.

[281] BIG.

[282] The Treasury, p.4.

[283] Ibid, p.4.

[284] Armour.

[285] Auer, p.52-53.

[286] Ibid, p.53.

[287] Kulunk, p.66.

[288] Independent Reserve, p.4.

[289] BBC News, Bitcoin becomes official currency in Central African Republic (27 April 2022) <,in%20diamonds%2C%20gold%20and%20uranium >.

[290] BBC News, IMF urges El Salvador to remove Bitcoin as legal tender (26 January) < > ; Bloomberg, Ditch Bitcoin: IMF Urges El Salvador to Rethink Crypto (26 January 2022) < >.

[291] Alexander & Cumming, p.247.

[292] Alexander & Cumming, p.247.

[293] Latimer & Duffy, p.121.

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