Australia’s main financial regulator, the Prudential Risk Authority, or APRA, today (April 21) set a 2025 target for implementing regulations governing cryptocurrencies.
“While activities associated with crypto-assets are still relatively limited in Australia, the potential scale and risks of such activities could become significant over time,” a policy roadmap issued by the authority states.
Rules will be developed to establish cryptocurrency guidelines for all regulated financial entities, the document states.
The roadmap anticipates that activities that will face new regulation will include: “investment in crypto-assets, lending linked with crypto-assets, issuance of crypto-assets, and providing services associated with crypto-assets for customers.”
For financial institutions, the document states, risks of interacting with cryptocurrencies could include operational risk, investment risk and credit risk.
Specific warnings include: “ADIs and insurers that invest in crypto-assets will need to ensure that they hold an appropriate level of regulatory capital, and factor any exposures into their ICAAP process and stress testing where relevant. Where a crypto-asset is defined as an intangible asset under the relevant accounting standards, it must be deducted from Common Equity Tier 1 Capital.”
The roadmap also states that RSE licensees who are considering investing in cryptocurrency must be able to demonstrate that their investment strategy is consistent with their duty to act in the best financial interest of their beneficiaries and complies with existing requirements for prudential investment governance.
The document further states, “There are a range of other risks to consider, including the implications for liquidity management, market risk management and large exposures measurement. Regulated entities also need to consider disclosure requirements.”
APRA offered immediate guidance engaging in crypto-related business, including that organizations conduct adequate due diligence before crypto transactions and “apply robust risk-management tools.”
The document indicates new scrutiny will extend to business related to stablecoins — cryptocurrencies whose value is tied to certain assets.
In the U.S., crypto investment regulation is confronting a number of thorny issues. Among them is a lack of transparency regarding taxation.