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Overview
An Australian Financial Services (AFS) licence allows holders to: Offer financial product advice Deal in financial products Operate financial markets and schemes Provide custodial, depository, trustee, crowd-funding, claims handling, and superannuation trustee services ASIC evaluates AFS licence applications by assessing the applicant’s competence, financial resources, and ability to meet regulatory obligations. Note that licensing is a one-time assessment of the business, not its owners or employees. Holding an AFS licence ensures adherence to basic standards like training, compliance, insurance, and dispute resolution, but does not guarantee service quality.
Timeframe: around 3 – 6 months
Minimum paid up capital: As of now, there is no explicit share capital requirement specified for companies seeking to engage in cryptocurrency activities in Australia. However, businesses must ensure they have adequate financial resources to meet the compliance and operational standards set by the regulatory authorities, such as the Australian Securities and Investments Commission (ASIC) and the Australian Transaction Reports and Analysis Centre (AUSTRAC).
Overview
As of March 2024, Australia does not yet have a defined process or timeline for cryptocurrency licensing, as regulations are still being developed. A draft framework was proposed in late 2023, with final decisions and licensing details expected by late 2024 or later. The Australian Securities and Investments Commission (ASIC) is anticipated to oversee licensing for crypto businesses like exchanges and brokers.
Currently, digital currency exchanges must register with AUSTRAC as service providers. Companies offering financial services related to digital currencies, such as trading or investment advice, need to obtain an Australian Financial Services (AFS) license from ASIC. This license permits the provision of various financial services within Australia.
Comprehensive Guide to Company Incorporation
Company structure
In Australia, a company must have at least one shareholder. For private companies, the number of shareholders is typically capped at 50 non-employee shareholders. This applies to companies seeking to engage in cryptocurrency-related activities. Public companies, on the other hand, must have a minimum of one shareholder and have no maximum limit on the number of shareholders.
For a private company in Australia, at least one director is required, and they must be a resident of Australia. Public companies are required to have at least three directors, with at least two being Australian residents. Directors play a critical role in ensuring the company’s compliance with regulatory requirements, including those related to cryptocurrency activities.
Confidentiality
- ▪Beneficial owners’ details – disclosed to the Authorities
- ▪Shareholders’ details – part of public record
- ▪Directors’ details – part of public record
Taxation
In Australia, cryptocurrency is treated as property for tax purposes. This means that:
- ▪Capital Gains Tax (CGT): Applies to the disposal of cryptocurrency. Individuals and businesses must report gains or losses on their tax returns.
- ▪Goods and Services Tax (GST): Cryptocurrency transactions are generally exempt from GST.
- ▪Income Tax: Profits from cryptocurrency trading are considered taxable income and must be reported accordingly.
It is essential for businesses to maintain detailed records of their cryptocurrency transactions to ensure accurate tax reporting and compliance with Australian tax laws.
Accounting requirements
Filing annual report is obligatory
Secretary – Required
Registered office – Local office setup needed.
The application process for a cryptocurrency license in Australia involves several key steps:
- ▪Registration with AUSTRAC: Businesses must first register as a digital currency exchange service provider with AUSTRAC by submitting detailed business information.
- ▪Obtaining an AFS License: Companies providing financial services related to digital currencies must apply for an Australian Financial Services (AFS) license from ASIC, including a comprehensive application detailing financial health, management, and compliance.
- ▪Compliance with AML/CTF Obligations: Companies must adhere to Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) requirements, including customer identification, reporting suspicious transactions, and maintaining transaction records.
- ▪Submission of Application: Gather all required documents and submit the application to the relevant regulatory body. The review process may involve multiple rounds of feedback.
- ▪Approval and Issuance: Upon approval, the company receives a license to operate in the cryptocurrency sector. The timeframe for obtaining a license varies, with more precise details expected by late 2024.
To apply for a cryptocurrency license in Australia, you must prepare and submit the following documents:
- ▪Business Plan: Detailed plan outlining the company’s operations, target market, and financial projections.
- ▪Financial Statements: Recent financial statements and forecasts demonstrating financial stability and capacity.
- ▪Compliance Plan: Comprehensive plan detailing adherence to AML/CTF obligations and other regulatory requirements.
- ▪Directors’ and Officers’ Information: Personal details, qualifications, and criminal background checks for all directors and key personnel.
- ▪Proof of Office: Evidence of a registered office in Australia, such as a lease agreement or ownership documents.
- ▪Identity Verification: Copies of identification documents for all shareholders and directors.
- ▪Operational Policies: Documents outlining internal policies and procedures for business operations and compliance.
- ▪Risk Management Framework: Detailed risk management strategy, including processes for identifying and mitigating risks.
- ▪Customer Due Diligence Procedures: Documentation of procedures for customer verification and ongoing monitoring.
- ▪Licensing Fee Payment Proof: Receipt or proof of payment for the licensing application fee.