The Senate select committee on financial technology and regulatory technology recently expanded its remit, changing its name to the select committee on Australia as a technology and financial centre.
Its mandate has been extended to the end of October, with chair senator Andrew Bragg outlining a number of new focus areas, including cryptocurrency and digital assets.
But Australian regulation has fallen behind the needs of the industry, the backbencher said in a recent speech, commenting he has recognised fintechs’ “need as commercial operators for a regulatory environment which is clear, transparent, predictable and flexible.”
“The problem is that there is not a clear policy framework, which we can’t leave to regulators – it is not their job to make policy. That is up to us, the policy makers elected by the people,” Mr Bragg said in an address to Blockchain Australia Week.
“A driver of the problem is that blockchain is a new form of property right.”
While a digital asset may draw upon the frameworks of a security, share, bond, personal property or contract, it should not be pigeonholed as such, the senator said. But without regulations that recognise it as a distinct enigma, regulators are forced to choose from existing categories.
“The status quo, according to ASIC’s current guidance, is if a blockchain product ‘fits’ into the existing taxonomy of schemes and products, it will be subject to the appropriate laws and regulations,” Mr Bragg said.
“The problem is that neither the regulator nor the regulated have any clarity about whether these products ‘fit’ into this scheme. The answer to the question can often mean the difference between acting unlawfully or providing a legitimate business.
“As a result of the lack of a policy framework, we are seeing digital asset businesses and FinTech businesses being de-banked.”
The lack of a regulatory framework has also made it harder to target harmful uses of the products, with some Australian banks choosing to avoid dealing with crypto assets altogether.
“Regulators such as AUSTRAC do not have clear guidance on distinguishing between the legitimate and illegitimate uses of these products. As a result, we are seeing an immense reticence among financial institutions in dealing with these products,” Mr Bragg said.
“Not only does this mean that our financial sector is being cut off from this opportunity, but it makes it harder to track and isolate instances of digital assets being used unlawfully. A sector-wide ‘chill’ means that law enforcement is flying blind when it comes to distinguishing legitimate from illegitimate uses.”
Start-ups also fall at risk of not knowing where they fit when it comes to their characterisation or the tax implications of ASIC’s position.
“We are aware that regulatory uncertainty is forcing crypto entrepreneurs to other jurisdictions. Not just Singapore, but also Germany and Britain,” Mr Bragg said.
“I want to assure you that the committee I chair is preparing to create a digital asset plan for Australia to tackle regulatory haziness and the lack of guidance from ASIC and the ATO on how digital assets will be treated.
“We know that Australia is punching above its weight with several fintech unicorns and more than a dozen decent sized projects that are receiving global attention. But to put it bluntly, I don’t want them trundling off to Germany or Singapore and taking with them hundreds of high paying tech jobs and millions of dollars in investment because it’s too hard or too expensive or too risky to do business at home.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
Sarah has a dual bachelor's degree in science and journalism from the University of Queensland.