CRYPTOPIA: Australian government unveils major payments reforms to embrace cryptocurrencies and digital assets

The Australian Government is looking to embrace cryptocurrency and digital assets with federal treasurer Josh Frydenberg announcing plans to  investigate the feasibility of a Central Bank digital currency, as well as the existential fintech terror of de-banking.

Speaking at the Australia-Israel Chamber of Commerce on Wednesday, Frydenberg said his plans “were most significant reforms to our payments system in 25 years”.

The government hopes to modernise the rules around issues such as Digital Wallets and BNPL as well as improving oversight and licencing around businesses that buy, sell or hold digital assets such as crypto.

Frydenberg is responding to a Senate report into the crypto space spearheaded by NSW Senator Andrew Bragg. The Treasurer has enlisted Bragg to assist with the implementation of the government plan. All up, he’s responding to 41 recommendations across three reviews into the payments system and the changes wrought by technology. The Government’s full response is here.

“Through our reforms, we will improve regulatory certainty for businesses, better protect consumers and investors and support competition by making it easier for innovative new entrants,” the Treasurer said.

By the middle of next year, the government hopes to have:

• Completed consultation on establishing of a licencing framework for Digital Currency Exchanges
• Finalised consultation on a custody or depository regime for businesses holding crypto assets so investors have greater confidence in their safe-keeping
• Received advice from the Council of Financial Regulators, working with other relevant agencies, on the underlying causes and policy responses to  de-banking.

“For businesses, these reforms will address the ambiguity that can exist about the regulatory and tax treatment of crypto assets and new payment methods.  In doing so, it will drive even more consumer interest, facilitate even more new entrants and enable even more innovation to take place,” Frydenberg said.

“For consumers, these changes will establish a regulatory framework to underpin their growing use of crypto assets and new payment methods.”

An ecstatic Senator Bragg hailed the Treasurer’s response, saying Australia will be a world-leading crypto hub under the plan.

“The world is watching Australia which is now setting the global standard for crypto, payments and digital wallet reform,” he said.

“These are key micro economic reforms which will drive more choice and lower prices for Australians. This will be a key driver of investment and jobs over the next decade.”

Ambitious scope

BTC Markets CEO Caroline Bowler praised the “ambitious scope” of the government response.

“It’s great to see that the gaps in Australian regulation relating to digital financial products and the exchanges who support them are being finally addressed at the highest level of authority, and the Coalition Government is not shying away from the big issues surrounding crypto, payments and de-banking,” she said.

“What’s more encouraging is that we now have a timeline for these reforms to take place, which we didn’t have before. Digital trade in Australia is estimated to be worth $192 billion in the domestic economy by 2030.

“Digital goods and services are our fourth largest export sector, according to the Department of Foreign Affairs and Trade. Therefore, it was only right for the Treasurer to prioritise digital financial regulation to drive future jobs and economic growth to ensure Australia remains globally competitive.”

RBA governor Philip Lowe was also upbeat in a speech on Thursday titled Payments: the future?, offering support for a retail form of digital currency.

“How far we go in this direction and what form these tokens might take are yet to be determined,” he said.

However, Lowe was “sceptica” about cryptocurrencies for general purpose payments.

“It is likely that the asset used for the settlement of most transactions in the economy will remain some form of secure fiat currency [such as the Australian dollar] with a stable value, rather than cryptocurrency with a volatile price,” he said.

“That is not to say there is no role for crypto assets. They can help support innovation, especially where they are linked to smart contracts and used in decentralised finance [or DeFi] applications.”