The Federal Government has been accused of dragging its feet on crypto regulation. 

Despite recent flameouts and frauds that have cost many Australians a lot of money, Treasury documents reportedly show that the government is still more than a year away from introducing new legislation to regulate crypto, NFTs, and web3. 

According to reports, the documents reveal Treasury has established a “crypto policy unit” and is in the process of consulting with Australian crypto companies to design new legislation.

One briefing allegedly acknowledges that there will be frustration from both crypto businesses and consumer groups over the perceived delay in implementing a licensing regime. 

The recent rush to exit crypto by retail customers may have bought the government more time to complete its “token mapping” exercise to provide clarity on how any new licensing framework would operate in practice.
However, since the briefings, crypto markets have bounced back, with the prices of Bitcoin and Ethereum rising more than 30 per cent this year, suggesting that there is still investor appetite for the risky, volatile markets.

While lawmakers and regulators around the world have begun to act, the Commonwealth appears to be taking its time to define how different parts of the crypto ecosystem should be considered under law and who will be given powers to regulate the sector. 

The government launched a “token mapping” project last August, and submissions for the project closed last Friday. 

Treasury has taken the lead in developing Australia's policy response and has hosted a “Crypto deep dive” meeting with the crypto policy unit.

The proposed regulations being discussed would point to Australia introducing some of the strictest laws in the world for crypto firms, potentially requiring capital requirements and disclosures akin to regulated banks. 

However, final submissions to cabinet are not expected until the back end of 2023, suggesting that legislation is not likely to come until well into 2024 or 2025.