Operators of Australian exchanges for Bitcoin and other digital currencies will now need to register with the country's anti-money laundering agency after new legislation passed through parliament.
AUSTRAC has been given the authority to monitor local cryptocurrency exchanges through the new Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017.
The bill was introduced in August to combat the threat of serious financial crime, in the wake of revelations about the Commonwealth Bank's breaches of money laundering laws.
It was also spurred on by global watchdog Financial Action Task Force (FATF) findings of significant deficiencies in Australia's anti-money laundering framework two years prior.
The new law, which passed through the senate yesterday, for the first time regulates Australia's digital currency sector.
The changes will see digital currencies treated the same as physical cash within a bank for anti-money laundering and counter-terrorism purposes.
The law requires businesses that offer digital currency exchange services to register with AUSTRAC, to identify and verify their customers, keep records of transactions, report threshold transactions and suspicious matters, and run an anti-money laundering and counter-terror financing program.
Similar measures are already in place in the US, Canada and the EU.
It will be considered a criminal offence to provide digital currency exchange services without being registered with AUSTRAC.
Penalties for non-compliance start from two years' jail and/or $105,000 for failing to register. They go as high as seven years jail and $2.1 million in penalties for corporations and $420,000 for individuals for severe offences.
AUSTRAC will run and maintain a digital currency exchange register of those approved to operate the services.