“Out of the shadows” — Australian Treasurer proposes new crypto regulations

Australian Treasurer Josh Frydenberg has backed regulatory proposals for crypto, saying they will “will firmly place Australia among a handful of lead countries in the world”.

“Australia has an opportunity to be among the leading countries in the world in leveraging this new technology,” he said.

Frydenberg announced the “reform plan” during an address to the Australian-Israel Chamber of Commerce on Wednesday (8th December). The plan will include a licensing framework for digital currency exchanges, regulating the purchase and sale of cryptocurrency, and consult on regulating businesses that hold crypto assets on behalf of consumers.

“If we do not reform the current framework, it will be Silicon Valley that determines the future of our payment system,” Frydenberg said, “Australia must retain its sovereignty over our payment system.”

The Treasurer said these measures would strengthen Australia’s financial system and improve customer protection, saying that crypto exchanges need the same regulations as banks since they hold “significant sums of peoples’ money and investments, and there needs to be accountability.”

“We’re taking this area out of the shadows and bringing it into a considered regulatory framework, which is world-leading,” Frydenberg said in an interview on 7News. “We want those businesses that are buying and selling cryptocurrencies to be properly licensed, to provide greater certainty and security to those people who are transacting in that area.”

If implemented, it would represent the most significant reforms to Australia’s payments systems in 25 years.

Reserve Bank boss on possible Central Bank Digital Currency plans

In his interview with 7News, Frydenberg mentioned the government was working with the Reserve Bank of Australia (RBA) to “look into the feasibility of introducing a Central Bank Digital Currency (CBDC)”.

A CBDC is a type of currency, currently in an experimental phase, which uses blockchain as the basis of the payment technology. It is a virtual form of a country’s fiat currency, which would likely be issued by that nation’s monetary authority and would be tied to the value of that nations’ fiat currency, emulating a stablecoin.

In a speech to the Australian Payments Network Summit on Thursday (9th December) RBA governor Philip Lowe said the bank is “open to the possibility” of issuing a digital currency or tokens in the form of an “eAUD“.

“I expect that they are likely to provide access to new token or account-based digital forms of money,” he said.

“This could allow day-to-day payments to be made by moving tokens around rather than moving banknotes or value between bank accounts.”

“One possibility is that the tokens are issued by, and backed by, the RBA, just as we issue and back Australian dollar banknotes. This would be a form of retail central bank digital currency or an eAUD.”

“I have said previously that the RBA is open to this possibility.”

Lowe said that the RBA hasn’t seen a strong public policy case to move in that direction, citing that Australia has an “efficient, fast and convenient electronic payments system.”

“It is possible, however, that the public policy case could emerge quite quickly as technology evolves and consumer preferences change,” he said.

Lowe also added his thoughts on stablecoins, a type of cryptocurrency pegged to the value of a fiat currency.

”If stablecoins and other types of privately issued digital payment tokens are to become more widely used for everyday payments, they need to be subject to a clear and effective regulation that encourages innovation and mitigates against risks to users and the financial system.”