Senator Bragg proposes Digital Assets Bill to parliament
Citing a lag in action from the current Federal Government, Senator Andrew Bragg introduced a Private Senator’s Bill to Parliament on 29 March 2023 to progress Australia as a leading jurisdiction for crypto asset regulation.
The Digital Assets (Market Regulation) Act 2023 follows Senator Bragg’s earlier draft, proposed in September 2022. It proposes a licensing regime for anyone offering trading or the exchange of ‘regulated digital assets’, as a subset of the broader ‘digital assets’ definition. It also defines stablecoins and a range of exchange tokens to capture most crypto currencies.
In 2019, Senator Andrew Bragg was appointed as a member of the Select Committee on Financial Technology and Regulatory Technology, which was tasked with investigating and reporting on the opportunities and challenges facing the fintech and regtech sectors in Australia.
The resulting report, known as the Bragg Report, made a number of recommendations for how Australia could position itself as a leader in fintech and regtech. One of the key recommendations was the need for a regulatory framework for digital assets that was both clear and technology-neutral.
Of the 12 recommendations in the Bragg report, 11 were adopted by the incumbent government and public consultation began on custody and licensing requirements.
The Digital Assets Act proposed by Senator Bragg seeks to implement this final recommendation.
Digital Assets (Market Regulation) Act 2023
The proposed bill introduces licenses for:
- Digital Asset Exchanges
- Digital Asset Custody services
- Stablecoin Issuers: (This includes requirements for Australian or foreign currency to be held in reserve in an Australian bank and for frequent reporting.)
- Disclosure requirements for facilitators of the e-Yuan in Australia, as the e-Yuan is the first Central Bank Digital Currency, or CBDC, released by a central bank of a major economy. The bill defines digital assets as ‘a cryptographically secured digital representation of value or contractual rights, which uses a form of distributed ledger technology and is transferable, storable or tradable electronically’.
The bill would require all digital asset providers to register with ASIC, and would subject them to a range of compliance obligations, including anti-money laundering and counter-terrorism financing requirements. It would also introduce a new licensing regime for digital asset exchanges, and require them to maintain adequate security measures to protect against cyber threats.
The implications of this bill for Australia’s digital assets sector are significant. By providing a clear and consistent regulatory framework, it will help to reduce the uncertainty that has plagued this sector. It aims to make it easier for businesses to operate in the sector, and encourage greater investment and innovation.
By introducing requirements for digital asset providers to comply with anti-money laundering and counter-terrorism financing regulations, the bill would also help to improve the overall reputation of the digital assets sector. With greater regulation and certainty, a broader range of investors, including institutional investors, are likely to be more attracted and able to invest in products that have been hindered by reputational concerns.
Will the Bill pass?
While the introduction of Senator Bragg’s Digital Assets (Market Regulation) Act 2023 proposesa significant development for Australia’s digital assets sector, it remains to be seen whether the bill will ultimately pass into law. The Australian government has been cautious in its approach to digital assets regulation, and there are likely to be competing priorities and concerns that could impact the bill’s chances of success.
Driving the call for regulation are broader priorities such as AML/CTF issues and customer safeguards, and many SW connections in the sector are keen to stablise the industry and improve the security of, and trust in products. However, some may be concerned about the potential for excessive regulatory burden on business and potentially consider the framework is not flexible enough to adapt to innovation in such a rapidly evolving sector.
Nevertheless, with increasing global recognition of the need for clear and effective regulation of digital assets, there is cause for optimism that Senator Bragg’s bill could ultimately play a key role in positioning Australia as a leading jurisdiction for crypto asset regulation.
How SW can help
SW works extensively with regulated financial services organisations operating in Australia in relation to licensing, internal audit, regulatory compliance, risk management, anti-money laundering and counter terrorism financing obligations, data protection mechanisms and tax structuring and compliance.
We have significant sector expertise and experience to support digital asset enterprises with preparatory activity prior to regulation, and necessary licensing and compliance activity when regulation is passed into law.
Reach out to our sector experts for a confidential discussion.