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Senator Bragg outlines private member’s bill on Australian regulation for digital assets

07 October 2022 | Australia
Legal Briefings – By Susannah Wilkinson, Julian Lincoln and Mayumi Martins

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The draft bill looks to address growing concerns Australia has fallen behind on consumer protection and investment opportunities across the crypto industry

On 19 September 2022, Senator released a draft private member’s bill titled Digital Assets (Market Regulation) Bill 2022 (Bill) (available here). The Bill proposes a new licensing regime for digital assets exchanges, digital assets custody services, stablecoins and reporting requirements for the digital Yuan (or e-Yuan). The draft Bill is open for consultation until 31 October 2022.

Background

In October 2021, the Senate Select Committee (chaired by Senator Bragg) released its final report on Australia as a Technology and Financial Centre (Report). The Report made 12 recommendations, including a new form of markets licence for digital currency exchanges and custody requirements for digital assets (see our Article available here). This Report led the Treasury to consult on a regulatory framework for crypto asset secondary service providers (CASSPrs Consultation Paper) in March 2022. HSF submitted a response to the CASSPrs Consultation Paper in June 2022. In August 2022, Treasurer Jim Chalmers announced a “token mapping” exercise, one of the Report’s recommendations, to assist in establishing a crypto assets regulatory framework.

The government has not yet released a draft bill regulating digital assets. This draft Bill was developed by Senator Bragg out of concern Australia is falling behind on consumer protection and investment opportunities.

The Bill

In summary, the Bill proposes to do the following:

  • Introduce licenses for:
    • Digital Asset Exchanges;
    • Digital Asset Custody services; and
    • Stablecoin Issuers, including requirements for Australian or foreign currency to be held in reserve in an Australian bank and for frequent reporting.
  • Establish disclosure requirements for facilitators of the e-Yuan in Australia, as the e-Yuan is the first Central Bank Digital Currency (CBDC) released by a central bank of a major economy.

Licence requirements

Similar to the CASSPrs Consultation Paper, the Bill proposed a new licensing regime for digital asset exchanges, digital asset custody service providers and stablecoins issuers in Australia. A licence would be exempted if entities already hold a recognised foreign licence authorising the digital asset activity in Australia. The Bill also proposes to expand the Australian Securities and Investments Commission (ASIC) functions and powers, including to supervise digital asset exchanges, investigate and apply penalties within the relevant licensing regime. The aim for these licencing requirements is to protect consumers and promote investment opportunities in Australia.

e-Yuan disclosure requirements

The Bill proposes to establish reporting obligations on banks facilitating the e-Yuan (defined in the Bill as the “digital units of value that are designed to be fungible and are issued by or under the authority of the People’s Bank of China”). The bill would require designated banks to collect and report information to the Australian Prudential Regulation Authority and the Reserve Bank of Australia on the number of Australian businesses that have accepted e-Yuan payments; the number of digital wallets facilitated by the designated bank; and the total amount of e-Yuan held in these wallets. This reporting requirement aims to protect national security and avoid risks of currency substitution and privacy breaches.

NEXT STEPS

The consultation period is open until 31 October 2022.