The proposals are set out in a new Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill which has been introduced before the Australian parliament.

Under the plans, digital currency exchange providers will be required to enrol and register on a digital currency exchange register maintained by the Australian Transactions and Reporting Analysis Centre (AUSTRAC), and adopt and maintain an AML and counter terrorism financing (CTF) program to "identify, mitigate and manage" the money laundering and terrorist financing risks that they could face.

In addition, the providers will be obliged to identify and verify the identities of their customers, and report suspicious matters and transactions involving physical currency that exceed AUS$10,000 or more, or foreign equivalent, to AUSTRAC.

The businesses will also face new record keeping duties under the proposed new laws. They will be obliged to retain records related to transactions, customer identification and their AML/CTF program for seven years.

The Bill, if passed into law, would update the existing Anti-Money Laundering and Counter-Terrorism Financing Act and the Financial Transaction Reports Act. The proposals have been outlined following a statutory review of the existing legislation.

Although the existing laws regulate trade in e-currency, the term "excludes convertible digital currencies, such as bitcoin, which are backed by a cryptographic algorithm", according to an explanatory document published alongside the Bill.

The Australian government said the reforms would serve to "close a regulatory gap" and encourage that continuing without subjecting digital currency exchanges to regulation "may impede the development or use of these currencies in the future and the growth of this sector and may also increase the likelihood that the sector could by targeted for nefarious purposes".

In a statement, Australia's justice minister Michael Keenan said: "These reforms appropriately balance the threat of organised crime and terrorism financing to the Australian community with ensuring excessive regulation doesn't hinder our financial sectors."

"The threat of serious financial crime is constantly evolving, as new technologies emerge and criminals seek to nefariously exploit them. These measures ensure there is nowhere for criminals to hide. Stopping the movement of money to criminals and terrorists is a vital part of our national security defences and we expect regulated businesses in Australia to comply with our comprehensive regime. AUSTRAC has a strong track record in ensuring our financial institutions comply with the law," he said.

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