Earlier this week, Treasurer Josh Frydenberg announced a plan to reform the payments industry. This “global” payments reform plan affects cryptocurrencies, digital wallets and BNPL providers, all of which operate largely outside government regulation.
Frydenberg says his reforms will transform Australia’s regulatory framework when it comes to payments and crypto assets. So what exactly does this imply?
What are the payments and crypto reforms?
They will begin in two phases, with the government starting consultations on the first early next year. Then the second, by the end of 2022.
The first will include a consultation on the feasibility of a retail central bank digital currency (CBDC) in Australia, with guidance to be provided by the end of 2022.
I wrote about the CBDC in October when the Special Senate Committee on Australia as a Technology and Financial Center asked the government to consider whether this would work for us.
For a TL; DR: a CBDC is essentially a digital version of existing legal tender. In our case, the Australian dollar. The CBDC would be a liability or claim on the central bank, in digital form. It’s also known as a stablecoin, because it’s, well, stable.
On the reforms that also concern crypto, the government hopes to have completed its consultation on the establishment of a licensing framework for digital currency exchanges by mid-2022. (Austrac already monitors all exchanges that operate in Australia, but like what the United States is reportedly reviewing, the Australian version would impose real regulation, not just crypto oversight)
Further work on crypto will include a consultation on a custody or deposit regime for companies that hold crypto assets on behalf of consumers and working on the issue of bank deletion.
By then, the government will also have received a report from the Tax Board on an appropriate framework for the taxation of digital asset and transactions.
On payments, by mid-2022, Frydenberg said the government will have established a longer-term strategic plan for the payments system, developed with industry and reviewed annually. And that it will determine what needs to change to modernize payment systems legislation to accommodate new and emerging payment systems, including consideration of BNPL and digital wallets. Afterpay and Zip are pretty happy with it, as you can imagine.
On BNPL, there are currently 5 million active Australian accounts receivable to buy now and pay later.
âFor consumers, these changes will establish a regulatory framework to support their growing use of crypto assets and new payment methods,â said Frydenberg.
“As more Australians use these technologies and invest in these digital assets, it is important that a strong regulatory regime underpin their interactions.”
If you want to read the government’s plan in more detail, head here on the Treasury website.