Senator releases private bill to regulate digital assets
On 19 September 2022, Senator Andrew Bragg released a draft private member’s bill entitled Digital Assets (Market Regulation) Bill 2022 (Bill). The draft Bill is subject to a six week consultation period and proposes to establish a licensing and reporting framework for digital asset exchanges, custody providers and stablecoin issuers (including designated banks dealing in digital Yuan).
Background
In 2021, the Senate Select Committee on Australia as a Technology and Financial Centre (led by Senator Bragg) released its report into the regulatory future of Australia’s technology, finance and digital assets industries (Report). The Report made 12 recommendations (11 of which were endorsed by the then Government), including a consultation on licensing digital asset providers. This resulted in a 2022 consultation by Treasury on a proposed regulatory framework for crypto asset secondary service providers (CASSPrs). However, Treasury’s consultation coincided with a change in Federal Government and a subsequent period of silence regarding the proposals. In August 2022, the new Government announced its intention to conduct a ‘token mapping’ exercise ’ that seeks to identify how crypto assets and related services should be regulated.
While the token mapping announcement received general support, industry has voiced concerns that a protracted exercise of categorising the 21,000+ token types currently on issue could delay the implementation of a regulatory framework and stagnate Australia’s progress in becoming a leading jurisdiction for crypto asset regulation. Addressing this concern, Senator Bragg released the Bill with commentary suggesting his intention to force the current Government to prioritise legislating a regulatory framework for digital assets.
Unpacking the Bill
Timing
The Bill provides a commencement date six months after the day on which it receives Royal Assent. After commencement, there is a proposed three month transition period within which the licensing obligations do not apply to the regulated activities. In effect, this would give captured entities nine months to obtain the relevant licence from the date the Bill receives Royal Assent.
Further, the Bill notes the licensing requirement will not apply in relation to the provision of a digital asset custody service to a person, if the provision of that service to the person started before the commencement of the Bill. This provision suggests that a custody provider would not be required to obtain a licence in relation to custody services provided to current customers at the date the law commences but would require a licence in relation to any new customers beyond such date. It is expected any grandfathering arrangements across each licensable activity will need to be clarified.
What’s next?
While the Bill was not introduced by the current Government, it is a private member’s bill that has the capacity to become law if passed by both houses.
The Bill has been introduced to industry as part of a six week consultation, which, given the drafting, may be subject to comprehensive industry comments and feedback, particularly in relation to how the proposed regime will interact with existing financial services regulatory frameworks. While Senator Bragg noted the intention of the Bill to force the Government’s hand in proposing its own regulatory framework, it may be that a subsequent draft be introduced by Senator Bragg into the Senate.
The consultation period is open until 31 October 2022.
Please reach out to our Fintech + Web3 team should you wish to discuss.
KNOWLEDGE ARTICLES YOU MAY BE INTERESTED IN:
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Treasury consults on crypto regulatory framework (Crypto Consultation Paper/CASSPrs)
Global Legal Insights: Blockchain & Cryptocurrency Regulation 2024