Regulatory Reforms Needed For Consistent And Fair Crypto Regulation

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As part of its multi-stage reform agenda, the Australian government has undertaken a consultative process to understand the crypto ecosystem better to ensure a consistent and fair approach to regulating crypto assets in Australia.

This is contained in the “Australian Government The Treasury Token Mapping” consultation paper released in early February 2023. The token mapping process identifies the key activities and functions of products in the crypto ecosystem, maps them against existing regulatory frameworks, and explores other areas that may require future reforms for crypto assets. 

The closing date for submissions from industry representatives, consumer groups, and other interested parties is March 3, 2023. After the token mapping process, the Australian government will then propose a licensing and custody framework for public comment in mid-2023. 

In August 2022, Reserve Bank of Australia and the Digital Finance Cooperative Research Centre (DFCRC) entered into a collaborative research project to explore use cases for a Central Bank Digital Currency (CBDC) in Australia. The key objectives of the research project were to identify and understand innovative business models, use cases, benefits, risks, and operational models for a CBDC in Australia.

According to DFCRC, more than 140 use cases were received from various industry participants that included startups, fintechs, technology vendors, financial services providers, public sector agencies, not-for-profits and charities. Due to overwhelming response from the participants, the DFCRC and RBA extended the submission period for CBDC use cases until March 31, 2023. 

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Whilst speaking at the 17th Central Bank Conference on the Microstructure of Financial Markets, in Sydney, Australia on December 8, 2022, Brad Jones, the Assistant Governor-Financial System Group at the Reserve Bank of Australia (RBA) noted that although no other advanced economy central bank had committed to issuing a general purpose Central Bank Digital Currency (CBDC), the RBA was keeping an open mind.

According to the “Token Mapping” consultation paper, a shared understanding of the crypto ecosystem is required to assist industry, regulators, and consumers in navigating the crypto ecosystem and its interaction with financial services laws. The outcomes from the consultative questions are expected to inform future policy development and crypto legislation.

The PricewaterhouseCoopers (PwC) Global Crypto Regulation Report 2023 noted that Australia did not have a bespoke regulatory framework for digital assets.

The Australian government’s consultative paper points out that some regulatory reforms and new regulatory approaches shall be required to cover crypto products that do not fall under any existing regulatory framework to ensure consumer protection and financial stability into the future.