The government has confirmed it is working with industry and regulators to provide effective settings for digital assets that balance “innovation with consumer protection”.
“Digital assets are a rapidly evolving part of the economy, offering opportunities for new products and productivity gains,” Treasury said in its Statement on Developing an Innovative Australian Digital Asset Industry, released on Friday.
“The potential benefits of these assets are far-reaching, from streamlining payments systems to transforming how we invest and do business.”
Treasury clarified that the legislative reforms, informed by action in jurisdictions such as the European Union and Singapore, will extend existing financial services laws to key digital asset platforms, but noted that this will not apply to the whole digital asset ecosystem.
“The government is also working with the Australian Securities and Investments Commission (ASIC) to ensure there are appropriate transitional arrangements ahead of the government’s legislative reforms coming into effect.”
Namely, the document details key elements to Australia’s approach to digital asset reforms, including:
• A framework for digital asset platforms (DAPs), which are online platforms that hold digital assets, such as cryptocurrency, for consumers.
• A framework for payment stablecoins, which will be treated as a type of stored-value facility (SVF) under the government’s Payments Licensing Reforms.
• Undertaking a review of Australia’s Enhanced Regulatory Sandbox.
• A suite of initiatives to investigate ways to safely unlock the potential benefits of digital asset technology across financial markets and the broader Australian economy.
There will be a key focus on DAPs, the statement clarified, with the aim of mitigating key risks for consumers as opposed to imposing a new “regulatory burden” on the digital asset issuers themselves or on the business that create or use digital assets for no-financial purposes.
“In parallel, the government is working on a comprehensive framework for payments service providers (PSPs). The Payments Licensing reforms will revise the existing licensing regime for non-cash payment facilities and ensure it appropriately covers the wide range of payment products and services now provided in Australia,” the document added.
Looking ahead, Treasury said that the commencement date for these reforms will be set through legislation, stating it intends to release draft legislation this year for consultation to invite feedback on methods of supporting a smooth transition. Notably, this includes relief from licensing requirements that would conflict with the intent of the reforms.
On Friday, the government also released its response to the Board of Taxation’s Review of the tax treatment of digital assets and transactions in Australia, which was delivered in February 2024.
In its response, the government agreed with the board’s recommendation that no cryptocurrency-specific taxation legislation should be introduced at the current time.
Moreover, the review found areas in the cryptocurrency ecosystem that are currently increasing in scale and developing at a particularly fast rate are – those being decentralised autonomous organisations (DAOs), decentralised finance (DeFi), gaming finance (GameFi), and non-fungible tokens (NFTs) – and recommended the government consider undertaking further work in these areas as the market develops.
Industry’s response
Responding to Treasury’s statement on Friday, BTC Markets chief executive Caroline Bowler described the reforms as “pragmatic” and “grounded”.
“The areas of reform are sensible and would keep Australia competitive with our global peers,” Bowler said.
“We appreciate that the suggested standards to be imposed on digital asset providers are commonsense and do not require a reworking of existing regulations. The carve-out of non-financial products and software development should be of relief for those who create and use NFTs – an area where Australia has shown ingenuity and bleeding edge creativity.”
However, the CEO underscored the need for additional details, particularly on the front of capital adequacy and custody requirements, noting that requirements shouldn’t be “overly burdensome” for business investment in Australia.
Crypto.com also welcomed the statement, praising the progress that the federal government is making on providing regulation for cryptocurrency assets via the existing AFSL framework.
“Crypto.com has long been an advocate for building off of the existing AFSL regime rather than forcing firms to obtain a market operating licence, and we are pleased to now see that the federal government supports this vision as well,” said Vakul Talwar, the exchange’s Australia head.
“In addition to harnessing the AFSL regime, the draft legislation can build off the learnings and successes of jurisdictions already making great progress in crypto regulation – UAE, Singapore and the EU for example, as well as the US, which has recently passed its Financial Innovation and Technology for the 21st Century (FIT21) Act, a bipartisan initiative described as a pivotal moment for the digital asset ecosystem.”
