As crypto regulations continue to unfold around the world, Australia is currently in the throes of considering the most appropriate model of crypto-asset regulation. The Department of the Treasury (Treasury) leads this workstream, given its role as lead economic advisor to the Australian Government, but there is no shortage of ideas.
In March 2023, Senator Andrew Bragg proposed reforms for the crypto sector in a private members bill, including a draft framework for digital asset exchanges, digital asset custody services and the issuing of stablecoins, plus mandatory monitoring and reporting in relation to certain offshore central bank digital currencies (CBDCs). The framework is set out in the Digital Assets (Market Regulation) Bill 2023 (Bill). The Australian Senate referred the Bill to the Australia's Senate Economics Legislation Committee (Committee) for review.
The Bill has now been “rejected” by the Committee. More specifically, the Committee has recommended that the Bill not be passed and that:
“the Australian Government continue to consult with industry on the development of fit-for-purpose digital assets regulation in Australia”.
The non-progression of this Bill was largely expected by industry, with the reforms likely to follow Treasury’s token mapping exercise. The results of this consultation are pending.
The Committee’s report is a valuable read of the overall status of Australian crypto-asset regulatory reforms and the critical issues considered by the Committee, including the importance of interoperability with the current regulatory environment. One interesting observation of note:
“Considering the evidence presented to the inquiry, the committee is of the view that the bill lacks the detail and certainty that investors, consumers, and the industry should be provided with. Crucially, the bill fails to interoperate with the established regulatory landscape, creating a genuine concern for regulatory arbitrage and adverse outcomes to the industry.” (at 2.137)
There are also several suggestions and recommendations throughout the report. A few key highlights include:
- the digital assets industry has developed rapidly in recent years and there is a need for a digital assets regulation regime to provide certainty to industry and balance consumer protections with industry innovation;
- the principles of ‘technological neutrality’ and ‘same risk, same regulation’ have broad support when regulating crypto assets; and
- foreign frameworks may inform thinking regarding the relevant framework.
Next steps
The next key development to keep an eye out for is Treasury’s next paper following the token mapping exercise. This is expected shortly. Our timeline of other key fintech regulatory milestones to watch is here.
In the meantime, please contact us if you have any questions. We continue to work with major industry participants on their products, platforms, complying with existing Australian financial services laws and supporting on APAC and global expansions.
We would be delighted to provide any legal advice you need.
