Senator Andrew Bragg says the federal government needs greater discretionary powers in the regulation of cryptocurrency to increase oversight and speed up the introduction of new rules.
Senator Bragg, who chaired the Senate Select Committee on Australia as a Technology and Financial Centre, told an APAC blockchain conference on Wednesday that the government needed extra resources to urgently regulate cryptocurrency and digital assets or “risk falling behind” countries like Singapore, the Bahamas, and Switzerland.
“Governments move slowly. We are talking on a time horizon of months, which is the Canberra equivalent of the speed of sound As it stands, there is simply not sufficient expertise inside the government, but we are catching up,” Senator Bragg said.
“The alphabet soup of executive branch agencies – ASIC, APRA, the ACCC, AFCA, the CFR, the RBA – are each given a statutory mandate which is directed at their own patch of turf, albeit one which frequently overlaps with the other.
“The government does not have the right powers to deal with these wide, systemic, and broad issues in an effective way. What is needed to carry these aspects into effect is three things: One, enough funding; Two, hiring experts to work on this permanently within a dedicated unit of Treasury and Three, a broad principles-based regulation-making power delegated by law to a Minister.”
After hosting five roundtable consultations with stakeholders, Senator Bragg said the creation of Australian licencing schemes for operators in cryptocurrency markets and storage services are popular solutions. These would be based on existing standards for capital adequacy, risk management, auditing and responsible person tests.
Commonwealth Treasurer Josh Frydenberg outlined a crypto reform agenda in December last year however, Senator Bragg wants the implementation timeline to be shortened.
“On timetables, we have committed to delivering the crypto markets system by the end of the year, I think we ought to be aiming for mid-year, such is the industry consensus and consumer protection needs.
“The new digital custody license could be established as a standalone new chapter in the Corporations Act just as there is a new chapter for Corporate Collective Investment Vehicles.”
The cryptocurrency sector is valued at around $2.1 billion. Around 20 per cent of Australians own cryptocurrencies.
He also claimed that there was a strong case for a structure of custody only banks, which only provide asset storage services, similar to what has been implemented in the US state of Wyoming.
Although Australian cryptocurrency exchanges Independent Reserve and Coinjar were among the first to receive regulatory licences in Singapore and the United Kingdom respectively, Senator Bragg lamented on other missed opportunities.
“Sadly, we have already seen some failures in recent times: the collapse of MyCryptoWallet which resulted in significant consumer losses, and we’ve also seen companies like MHC Digital Code moving abroad as they chase more crypto-friendly settings,” Senator Bragg said.
“Both are big blows. Both examples of why we need regulation. If we do not act, and act fast, it is only a matter of time until these events are repeated. The reality is that crypto is unregulated in Australia.”
Further, Senator Bragg does not want the proposed Compensation Scheme of Last Resort (CSLR) expanded to cryptocurrency. In a Senate report published in February Senator Bragg said that “the risk of moral hazard is real, and we should not expand the CSLR.”
On the same day, the Industry Advisory Committee on cybersecurity released a report calling for minimum security standards for cryptocurrency exchanges, better crypto investment education, more resources for regulation of the technology and greater regulatory clarification.
Last October, The Select Committee on Australia as a Technology and Financial Centre made 12 regulatory recommendations including around licencing and the growing issue of debanking.
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