The Australian Prudential Regulation Authority (APRA) has released a crypto-asset risk management expectations and policy roadmap.
The roadmap was prepared due to the rapid growth and development of cryptocurrency and blockchain technology. To ensure Australia reaches its full potential as a digital economic leader, APRA has identified preliminary risk management strategies to benefit the crypto-asset sector.
In regard to risk management, APRA has stressed the notion of decentralised finance and the role of cryptocurrency exchanges and entities. Due to a lack of regulation, cryptocurrency requires oversight from the entities that enable Australians to invest in and dispose of cryptocurrencies. Therefore, APRA suggests that cryptocurrency exchanges and entities adopt a proactive approach to mitigate against potential risks. Particularly, APRA expects that entities will:
- perform due diligence and comprehensive risk assessments before engaging in activities associated with crypto-assets
- prepare mitigation tactics in situations of crypto-asset risk
- consider the principles and requirements of Prudential Standard CPS 231 Outsourcing or Prudential Standard SPS 231 Outsourcing when using third parties for business operation, and
- delineate clear accountability and reporting obligations to APRA and the Australian Securities and Investments Commission.
In regard to policy, APRA is creating a long-term prudential framework for cryptocurrency in line with international regulators. This will be based on agreed-upon standards for authorised deposit-takin institutions with exposure to crypto-assets. Going forward, APRA plans to:
- conduct further consultation into crypto-activities
- develop operational risk management practices, covering control effectiveness, business continuity, and service provider management, and
- regulate stablecoin use.
Later this year, APRA will begin its consultation with the Basel Committee on crypto-assets and operational risk standards.
For the full reading of the media release, see here.