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.

Background

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.

Contributor

Rachel Craft

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National Australia Bank (NAB) recently announced the launch of its stablecoin, AUDN, which is backed by the Australian dollar. The move comes amid the exponential growth in digital payments, ownership, and trading in cryptocurrency, stablecoins, and other digital assets in Australia over the last few years.

In a recent conversation with Danny Armstrong, NAB’s Chief Innovation Officer, Howard Silby, highlighted the importance of stablecoins as essential building blocks for the new web3 economy and offering stable cash links to other blockchain applications. The Australian dollar-backed stablecoin is expected to avoid the fluctuations associated with cryptocurrencies and offer a more efficient means of payment than traditional methods.

In the interview, we explored topics such as the advantages of stablecoins, the risks associated with conducting transactions on the public blockchain, and NAB’s future plans. Minted in several currencies, Howard emphasised the potential to facilitate cross-border transactions and high-value use cases, such as the carbon market and repo transactions. He also discussed green deposits and sustainable finance, supply chain financing and trade settlements and much more.

We invite you to watch the full interview to learn more about NAB’s stablecoin and its potential benefits for various industries and use cases.

The post NAB stablecoin, plans & regulation | SW talks to Howard Silby appeared first on SW Accountants & Advisors.

On 18 October 2022, SW’s Danny Armstrong sat down with CEOs Ruslan Kogan, Founder and CEO Kogan.com (ASX:KGN), Guy Carvalho, Co-Founder & CEO IBoA a member of Novatti Group (ASX:NOV) and Kurt Hansen, CEO Tesserent (ASX:TNT) to explore what digital transformation has meant for their businesses.

It was a candid, informative and interesting conversation. We invite you to take a look.

The post Digital Transformation Embrace the ride appeared first on SW Accountants & Advisors.

Increased usage has led to a raft of new products and platforms, prompting governments and regulatory bodies around the world to review the suitability of existing regulatory frameworks and engage with industry to ensure regulation and protections are suitable.

While there are currently three types of stablecoin, Novatti has launched its Australian stablecoin, AUDD. Backed by a fiat currency – the Australian dollar – it is less volatile than other cryptocurrencies and more efficient than traditional payments methods.

SW’s Danny Armstrong sat down with Peter Cook, the CEO of Novatti, for the first of our SW Financial Services interviews on the digital asset landscape.

Peter takes us through the different types of stablecoin, the AUDD point of difference, the Stellar platform, future plans and the trade and payment benefits for exporters, importers and domestic businesses.

Click below to watch the full interview and reach out to our Financial Services Digital Assets team for further assistance.

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