Earlier this week, Treasurer Josh Frydenberg announced a payments industry reform plan. This ‘comprehensive’ payments reform plan affects cryptocurrencies, digital wallets and BNPL providers, all of which operate largely outside of government regulation.
Frydenberg says his reforms will transform Australia’s regulatory framework as it applies to payments and crypto assets. So what does it involve exactly?
What are the payments and crypto reforms?
They will kick off in two phases, with the government to begin consultation on the first early next year. Then the second, by the end of 2022.
The first will include consultation on the feasibility of a retail Central Bank Digital Currency (CBDC) in Australia, with advice to be provided by the end of 2022.
I wrote about the CBDC back in October when the Senate Select Committee on Australia as a Technology and Financial Centre asked the government to consider if it would work for us.
For a TL;DR: a CBDC is essentially a digital version of existing legal tender. In our case, the Aussie dollar. The CBDC would be a liability of, or a claim on, the central bank, in a digital form. It’s also known as a stablecoin, because it’s, well, stable.
On reforms that also relate to crypto, the government by mid-2022 hopes to have completed its consultation on the establishment of a licencing framework for Digital Currency Exchanges. (Austrac already monitors all exchanges that operate in Australia, but like what the U.S. is reportedly looking into, the Aussie version would impose actual regulation, not just monitoring of crypto)
Further work on crypto will include consultation on a custody or depository regime for businesses that hold crypto assets on behalf of consumers and working through the issue of de-banking.
By this time, the government will have also received a report from the Board of Taxation on an appropriate framework for the taxation of digital transactions and assets.
In relation to payments, by mid-2022, Frydenberg said the government will have set out a strategic longer-term plan for the payments system, developed with industry and reviewed annually. And that it will work out what needs to change to modernise payments system legislation to accommodate new and emerging payment systems, including consideration of BNPL and digital wallets. Afterpay and Zip are pretty happy about this, as you’d imagine.
On BNPL, there’s actually 5 million active buy-now pay-later Australian customer accounts.
“For consumers, these changes will establish a regulatory framework to underpin their growing use of crypto assets and new payment methods,” Frydenberg said.
“As more Australians utilise these technologies and invest in these digital assets, it is important that a robust regulatory regime underpins their interactions.”
If you want to read the government’s plan in greater detail, head on over here to the Treasury website.