Cryptocurrency businesses and assets would be licensed by Treasury and a new system introduced in corporate law under a plan to regulate the sector being put forward by a parliamentary Committee.
The Select Committee on Australia as a Technology and Financial Centre has focused its third and final report, tabled in Parliament on Wednesday evening, on introducing a new framework for digital currencies and a legislative foundation for the sector.
Chaired by NSW Liberal Senator Andrew Bragg, the committee has made 12 recommendations with a focus on new licensing regimes, tackling emissions related to crypto mining, and addressing the growing issue of debanking.
Senator Bragg said he wanted to deliver realistic recommendations for reform that balance consumer freedom with protections.
“The guiding philosophy here has been to recommend a package which was going to protect consumers, whilst mainstreaming digital assets and balancing that against driving more investment in Australia,” Senator Bragg told InnovationAus.
“My governing thought here is that the disruption that comes from DeFi, crypto and digital assets more broadly is a good thing for consumers because it improves choice and lowers costs, but it’s not without risks and at the moment you’ve basically got an unregulated sector.”
The Select Committee has recommended a new licensing regime for digital currency exchanges and for the custody of digital assets such as cryptocurrencies, falling under Treasury’s regime. It has also pushed for the introduction of a new system under Australian corporate law, to be known as a decentralised autonomous organisation (DAO).
“You don’t want to use old hooks for new ideas, I don’t want to hang the new coat of a cryptocurrency regime on a 20-year-old Corporations Act. I want it to be in the Corporations Act but I don’t want to use what’s already there,” Senator Bragg said.
“We want to have regulation and it should be in the Treasury portfolio, but we should look to find new regimes that are fit for purpose. We should be searching for new solutions within the Treasury portfolio to promote innovation – forcing new ideas onto hold hooks risks losing innovation.”
The Committee has also recommended that anti-money laundering guidelines be clarified so they can stop “gumming up the innovation works”, for certain digital token transactions to be exempt from the capital gains tax, and for Treasury to investigate the potential of a central bank digital currency, rather than the Reserve Bank.
The impact of cryptocurrency mining on the environment has been in the spotlight recently, and Senator Bragg is pushing for a 20 per cent company tax discount for digital asset mining companies sourcing their own renewable energy.
“We are going to get net zero and I don’t think the people want to see bitcoin mining driving our emissions in the wrong direction, but I equally understand there’s a value in having this onshore,” he said.
Debanking – where tech firms, often those focusing on cryptocurrencies, are blocked from accessing banking services – was a key issue throughout the committee’s inquiry, and two recommendations have focused on tackling this.
In relation to the remittance sector, a new due diligence scheme should be created to address denbaking, something the competition regulator has already recommended and will be in place by June next year.
The Committee also recommended that the Australian Financial Complaints Authority (AFCA) develop clear processes for companies that have been debanked.
“Once you have licensing regimes for cryptocurrency markets and custody, and DAOs, then you’ve got licensed businesses which can go to AFCA. At the moment not much is regulated and AFCA has no role,” Senator Bragg said.
“What I’m trying to do here is search for a liberal solution to debanking. I’m conscious that there are people who want to force banks to bank certain customers and that’s inconsistent with the liberal approach, we don’t tell people who to bank, but equally we don’t want the country to lose the benefits of the innovation that digital asset businesses provide.
“The testimony uncovered by the Committee was very clear: debanking is rampant in Australia and in many cases it is totally unjustified. This is a liberal solution to that problem.”
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