Treasurer moves to regulate cryptocurrency

Marion Rae
(Australian Associated Press)

A plan for cryptocurrency regulation and an overhaul of digital payments has left some sceptical and others welcoming Treasurer Josh Frydenberg’s ambition.

Bitcoin and other cryptocurrencies would emerge from the shadows under a financial licensing scheme for crypto exchanges, he announced on Wednesday.

With more than 220 million participants, global cryptocurrency assets are worth more than $US2 trillion ($A2.8 trillion).

“Australia has an opportunity to be among the leading countries in the world in leveraging this new technology,” Mr Frydenberg said, joining fellow Liberal Jane Hume who said crypto was “not a fad”.

“Recent surveys have found that up to 17 per cent of Australians currently own cryptocurrency, with that figure likely even higher among young Australians.”

Early next year, he will begin talks on a licensing framework for digital currency exchanges that will regulate the purchase and sale of cryptocurrency assets, and on a custody regulatory regime for businesses that hold crypto assets on behalf of consumers.

BTC Markets chief executive Caroline Bowler welcomed the timeline and “ambitious scope” of the changes.

“It would be a crushing shame to not have our regulation keep pace with international peers such as Singapore, Canada and Britain,” she said.

Consumer advocate Gerard Brody said it was less clear how these changes would protect against scam losses.

Mr Frydenberg is also looking at a central bank digital currency (CBDC), with advice on a pilot due before the end of 2022.

But advocates for the cash industry said an Australian CBDC should not replace physical banknotes and coins.

“Some Australians will never be able to use and access digital dollars and they will be largely excluded,” said Jason Bryce, a spokesman for CashWelcome.

The Reserve Bank’s Project Atom, a pilot for a wholesale “token” to be used by banks, reported success after being trialled by Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys.

Funding, settlement and repayment of tokenised syndicated loans was trialled on an Ethereum-based platform.

Project Atom demonstrated the potential for a wholesale CBDC to make financial market transactions safer and more efficient, assistant governor Michele Bullock said.

“De-banking” is another problem for individuals and businesses that the treasurer wants to tackle. It occurs when a bank declines to provide a banking service.

Almost half of Australians make payments using their mobile phone and COVID-19 has accelerated the use of digital wallets.

About 55 million non-cash payments worth about $650 billion are made in Australia every day, from shopping online to digital pay packets landing in a bank account or a tap and go payment for a coffee.

Regulators will be tasked with looking at taxation, fees, transparency and competition in the market.

Mr Brody, chief executive of Consumer Action, said the treasurer also had an opportunity to protect people from debt and financial stress from buy now, pay later services.

At odds with decentralised finance that tries to take back control from institutions, the treasurer says centralising oversight of the payment system will give the government a greater leadership role, including new powers for him to intervene.

Westpac chief executive Peter King said Australia needed a system fit for the digital age.

“Modernising our payments infrastructure and its regulation, including cryptocurrency regulation, will strengthen our financial system and improve protections for customers,” he said.

“Today’s announcement is good news.”

The Commonwealth Bank already has plans to roll out crypto services to customers next year.

Shadow treasurer Jim Chalmers said no action would be taken on payments or cryptocurrencies before the next federal election, which must be held by May.

“This is just a commitment to consult on the government’s last consultation.”