The Australian Prudential Regulation Authority (APRA) released a set of initial risk management expectations for all regulated entities involved in activities related to cryptoassets. The regulator also issued a policy roadmap until 2025.
In its letter, APRA says it expects all regulated entities to adopt a prudent approach when undertaking activities associated with cryptoassets. The regulator requests such entities to ensure any risks are well understood and well managed before new initiatives are launched.
The regulator says it is developing a long-term prudential framework for cryptoassets and related activities in consultation with other regulators from abroad.
Under its policy roadmap, APRA intends to:
- In relation to crypto activities: consult on requirements for the prudential treatment of cryptoasset exposures by Australian entities for authorized deposit-taking institutions (ADIs) after the Basel Committee completes current consultation. In Australia, this consultation is expected to be performed in 2023, and APRA will take the need for initial prudential guidance in the interim into account;
- Regarding operational risk: advance new and revised requirements for operational risk management, covering control effectiveness, business continuity, and service provider management. The draft prudential standard is to be released for consultation in mid-2022;
- In relation to stablecoins: the agency will consider possible approaches to the prudential regulation of stablecoins. This work will be subject to the development of a broader legislative and regulatory framework, and APRA plans to consult on prudential requirements for large stored value facilities (SVFs) in 2023.
According to the letter, APRA expects all regulated entities to:
- Conduct due diligence and a comprehensive risk assessment before they engage in activities associated with cryptoassets, and also make sure they understand and have actions in place to mitigate, any resulting risks;
- Consider the principles and requirements of Australia’s prudential standards when relying on a third party in performing activities involving cryptoassets;
- Apply strong risk management controls, with clear accountabilities and relevant reporting on the main risks associated with new ventures.
APRA acts as the prudential regulator of the financial services industry in Australia. The agency oversees banks, credit unions, building societies, various insurance industry players, as well as most members of the superannuation industry. APRA supervises institutions that hold an aggregate AUD 7.9tn (USD 5.9tn) in assets for Australian depositors, policyholders, and superannuation fund members, according to data from the regulator.