Crypto License in Australia

In regards to crypto currency business, there are two types of registrations that are of interest to crypto entrepreneurs: Digital Currency Exchange (DCE) and Remittance Service Provider. Both registrations are subject to the same requirements, as they enter a similar frame designed by the AML Act of 2006.

Digital Currency Exchange

As the name indicates, this registration allows for the exchange of cryptocurrency with fiat money, and vice versa. This is the fundamental basis to run a crypto exchange platform for example. Such a company could also provide digital wallet services and custody of funds.

Remittance Service Provider

This registration allows a company to offer remittance services: domestic and international money transfers. An Australian Remittance Service company can accept transfer instructions, make funds available and operate a remittance network.

How the registrations synergize

The two activities aforementioned are distinct. A company holding both registrations can offer integrated services, in order to bridge the gap between cross-border transfers, fiat money and cryptocurrency. Synergically, this allows for the use of crypto as a transfer mechanism, offering lower cost and higher speed than traditional banking channels.

Cryptocurrency companies in Australia are subject to the Digital Currency Exchange (DCE) framework and/or the Remittance Services framework, depending on their activities. The Digital Currency Exchange registration is specific to crypto and therefore mandatory for such activities, while the Remittance Services registration expands on what a company already registered as a DCE can do, as it permits remittance and money transfer.

It is possible for a company registered either as a DCE or a Remittance Services provider to further register for the other activity. It is important thought that they do not undertake any regulated activity without being registered for it in the first place.

Both frameworks are defined by the Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 and enforced by AUSTRAC, the financial intelligence body of the Australian government. Together, they define the requirements, obligations and authorizations pertaining to registered Digital Currency Exchange companies and Remittance Services providers.

Crypto companies registered in Australia are subject to the taxation applicable to Australian companies.

The Corporate Income Tax applies. Its rate is 25% for entities whose turnover is less than 50M AUD (approximately 33M USD) and 30% above that. The rate applies to all taxable profits of the company.

There are no taxes specifically targeting cryptocurrency business in Australia.

The Act does not explicitly require a company to be registered in Australia in order to register with AUSTRAC for Digital Currency Exchange and Remittance activities. However, the need for physical presence and business activity in the country makes it highly advisable. It also helps when negotiating with Australian banking institutions and other administrations.

The process to register a Limited Liability Company in Australia is straightforward, and does not require anything that isn’t necessary for the crypto business registration in the first place.

The registration of an Australian company permits your business to claim being Australian and to show an Australian business name and address on its website, which is highly trusted by customers, given the reputation of Australia.

As stated above, the first requirement to apply for registration as a crypto company in Australia is to establish a physical business presence in the country.

As the framework is defined by the AML-CFT Act, a major emphasis is made on the content of the Anti-Money Laundering program of the application. It should include:

• A complete risk assessment of the business;
• A risk assessment training program for employees;
• An employee due diligence program;
• Description of the procedures to communicate with AUSTRAC;
• Description of the reporting procedures;
• Procedure to keep the AUSTRAC registration and enrollment data up to date in their systems;
• Procedures for ongoing customer due diligence and transaction monitoring;
• How records are kept;
• Procedures for the collection and verification of KYC (“Know Your Customer”) data.

An AML compliance officer must be appointed to properly enforce the content of the program.

All key personnel will also be required to provide a certificate of non criminal record.

If the company is part of a larger group or is already licensed in another jurisdiction, it should be indicated to AUSTRAC. This works for both digital currency exchange and remittance services.

The process to register as a crypto company in Australia is simple, but requires minute preparation and a strict observance of the requirements.

And the requirements first and foremost make physical presence in Australia mandatory for the applicant. This means that only a company with a physical office in the jurisdiction, where the business is actually happening, can register. In more concrete terms, this means that a company willing to get a crypto license in Australia will be required to rent an office space and to hire local personnel (LegalBison’s legal team advises a director and a compliance officer). Note: the company doesn’t have to be Australian, but it must be able to operate on its soil, therefore an Australian company is recommended.

The company must also enroll as a reporting entity, a process that is separate from the registration as a crypto business.

As the other documentary requirements are fulfilled, notably the ones pertaining to Anti Money Laundering, to reporting, and to assessing risks, the application can be submitted to AUSTRAC. The AUSTRAC CEO will then statute on the application within 90 days, extensible to 120 days if assessed as necessary.

The company is free to operate as soon as AUSTRAC validates the registration and adds the company into the official registers, provided that the AML-CFT program has been adopted.

What matters the most to the regulating authorities of Australia once the crypto company is active, is the dutiful application of the AML-CFT program and the proper reporting in the scope of Anti-Money Laundering and Countering the Financing of Terrorism.

In case of any change in activity or organization, the company must advise the AUSTRAC CEO within 14 days.

As for all reporting entities registered in Australia, a registered crypto company can be liable to pay the annual industry contribution levy, if it fills one or more of the following conditions:

• Earnings of 100 million AUD or more;
• A large number of transaction reports relative to other entities;
• A high total value of transaction reports lodged with AUSTRAC during a calendar year, relative to other entities.

“Large number of transactions” and “high total value of transaction reports” aren’t further specified by AUSTRAC.