On 20 October 2021, the Senate Select Committee on Australia as a Technology and Financial Centre (Committee), led by Senator Andrew Bragg, released its highly anticipated final report into the regulatory future of Australia’s technology, finance and digital asset industries.

Based on more than 100 submissions, the report sets out 12 key recommendations, positioning Australia as a leading hub for digital currency related businesses by offering greater clarity on how digital assets and digital asset-adjacent services should be regulated. The report includes recommendations addressing cryptocurrency and digital asset regulation, decentralised autonomous organisations, Australia’s tax and anti-money laundering and counter-terrorism financing regimes in the digital asset context, issues relating to de-banking, the policy environment for Australian neboanks, and options to replace the Offshore Banking Unit.

The Committee’s report represents a significant moment in the future regulation of digital assets, with many of the recommendations being among the first of their kind globally to comprehensively address such matters at a legislative level. This article summarises the Committee’s 12 recommendations.

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The Committee found that Australian digital currency exchanges (DCEs) are currently subject to limited regulatory oversight, despite some DCEs managing billions of dollars' worth of trades annually and holding hundreds of millions worth of client assets in custody. Current requirements for DCEs are broadly limited to registering with the Australian Transaction Reports and Analysis Centre (AUSTRAC) for the purposes of meeting anti-money laundering and counter-terrorism financing (AML/CTF) obligations, which the Committee heard to be 'light touch' in practice.

The Committee is of the view that a more thorough regulatory framework will assist the industry to mature. It considers that a licensing regime will demonstrate that comprehensive consumer protections are in place, and can also help to address bank concerns about risks posed by individual digital asset providers.

The Australian market licensing regime under the Corporations Act 2001 (Cth) (Corporations Act) is not well suited for direct application to DCEs. Therefore, the Committee recommends the creation of a new category of market licence that enables DCEs to demonstrate a level of commitment to consumer protection and operational integrity.

It is anticipated that the key requirements of the new market licence category will include, at a minimum, requirements relating to capital adequacy, auditing and responsible person tests (which are expected to be commensurate with the business' size).


The Committee found that custody arrangements for digital assets present some unique risks that are not analogous to traditional assets (eg, exposure of private keys for crypto assets to loss or theft) and that introducing a new regulated framework for these arrangements will enhance consumer confidence and encourage investment.

The Committee considers that having a clear framework in place will also spur the development of a custodial industry for digital assets in Australia and enhance economic opportunities. The Committee noted that many of the general risks and market constructs required for digital asset custody are broadly similar to those for traditional assets and that the Committee received submissions on how a custodial framework should work. The Committee believes this will assist the government in developing a bespoke custodial or depository regime for digital assets.

It is expected that this new regime will align with the general principles for custody of traditional assets while dealing with the unique features of digital assets.


The Committee noted that very few digital assets in Australia currently meet the legislative definition of financial product under the Corporations Act, however the Australian Securities & Investments Commission (ASIC) noted that while it will not advise on such matters, any crypto asset that does meet the definition of financial product will require the issuer to hold an Australian financial services licence.

The current uncertainty around when particular digital assets fall within ASIC’s regulatory perimeter needs to be addressed to give investors and market participants the clarity needed to operate effectively. While the Committee noted that ASIC has recently undertaken some consultation in this area, further work is needed.

While many submissions suggested that a variety of digital asset definitions could be inserted into the Corporations Act to bring digital assets within the scope of the financial services regulatory regime, the Committee considers that the first step is to conduct a government-led token mapping exercise to assist in developing an appropriate regulatory model.


The Committee noted the rapid uptake of Decentralised Autonomous Organisation (DAO) structures as attributable to the commensurate increase in decentralised finance (DeFi) projects made available to consumers. DAO structures represent a new category of organisation operating on decentralised blockchain infrastructure, whose activities are subject to governance arrangements and operations largely pre-determined in open source code and enforced through smart contracts.

DAOs are decentralised ownership, control and operation among network participants, meaning they do not clearly fall within any of Australia’s existing corporate structures. Legal liability for members (ie, network participants) for these organisations can in some circumstances be unclear and this uncertainty may prevent the establishment of projects of significant scale in Australia.

The Committee considers that the introduction of a new DAO legal identity with limited liability for members will drive innovation and economic activity and make Australia a magnet for DAO innovation. The Committee noted Wyoming’s recent recognition of a DAO legal entity and equally considers Australia should be at the forefront in this area.

The Committee recommended that the government should examine the Coalition of Automated Legal Application’s published model law for DAOs as well as other international examples, to determine an appropriate DAO company structure in Australia. It noted that the introduction of a new company type is not controversial for Australia, having recently finished the introduction of the new Collective Corporate Investment Vehicle.


AUSTRAC is responsible for implementing AML/CTF guidelines released by the international Financial Action Task Force (FATF) on virtual asset service providers. The ‘travel rule’ has been the subject of much debate, with some jurisdictions encountering numerous implementation issues. The travel rule requires financial institutions to include verified information about the originator (payer) and information about the beneficiary (payee) for wire transfers and other value transfers throughout the payment chain. However, technological solutions to enable virtual asset service providers to comply with the ‘travel rule’ are still under development and only beginning to be rolled out globally.

AUSTRAC’s interpretation of FATF guidelines needs to strike a balance between appropriately managing risks, without implementing the travel rule in a way that undermines the operation of legitimate businesses. The Committee considers that technological solutions to address the driver of the travel rule should be adopted at the earliest opportunity, rather then relying on a punitive approach.

Therefore, the Committee recommends that Australia’s AML/CTF regulations should be clarified to ensure they are fit for purpose for DCEs and crypto asset businesses and should not undermine innovation.


The Committee heard multiple concerns in respect of Australia’s current tax regime for digital assets, which compares less favourably with other jurisdictions such as Singapore. Concern was raised regarding the lack of clear guidance from the Australian Tax Office (ATO) about the application of existing principles to new and emerging technologies.

Particular concerns were raised about the capital gains tax (CGT) treatment of digital assets when they are held as an investment. Because many digital asset transactions take place several steps away from a crypto-to-fiat-currency trade, it can be very difficult for taxpayers to correctly assess their CGT liabilities under the current tax law and ATO guidance for these transactions. The lack of clarity on these issues is compounded for newer DeFi digital assets, which can operate in ways that fall outside of the scope of what the CGT regime is generally equipped to deal with.

The Committee considers that the CGT rules need updating to enable digital asset transactions to be undertaken with confidence as to their tax implications. Therefore, the Committee recommends that the CGT rules be amended so that digital asset transactions only result in a taxable event for CGT purposes when they genuinely result in a clearly definable capital gain or loss. This may require the creation of a new CGT asset or event class that enables specific concessions or exemptions to be applied.


The Committee received several other tax related proposals, however is not inclined to recommend a wholesale review at this time. One area that was given prominence relates to the energy consumption concerns associated with some digital asset protocols, particular the energy intensity of Bitcoin mining.

The Committee noted that where cryptocurrency mining and related activities are taking place in Australia, these activities should not undermine Australia’s net zero emissions obligations. As such, the Committee considers that companies engaging in these activities should be incentivised to source their own renewable energy, via a company tax discount.


The Committee noted the work the Reserve Bank of Australia (RBA) is currently undertaking exploring options for a wholesale central bank digital currency (CBDC). The RBA has generally been of the view that it does not see a public policy case for implementing a retail CBDC in Australia.

The Committee considers that the viability of a retail CBDC should be further investigated by the Treasury.


The Committee received numerous submissions highlighting the issue of de-banking of fintech businesses, particularly those in the remittance, payments and digital assets sectors. The Committee is concerned that the lack of banking options for digital asset companies in particular is not only hampering innovation and investment in Australia but is potentially creating a single point of failure for the industry and also leading to ineffective competition and a concentration of risk.

The Committee noted that de-banking is a complex global problem, which links back to underdeveloped regulatory arrangements and severe penalties associated with breaches (leading to risk aversion). The Committee stated that the intention is not to force banks to take on business but providing a clearer regulatory framework will increase banks’ confidence in dealing with crypto businesses.

The Committee addressed the work previously undertaken by the Australian Competition and Consumer Commission (ACCC) with respect to the supply of foreign currency conversion services in Australia, which recommended a government working group be established to develop a scheme through which due diligence requirements of the banks can be addressed. The Council of Financial Regulators (CFR) has now established a cross-agency working to further examine issues relating to de-banking and potential policy responses. However, there is no current timeframe on when this working group will finalise any policy recommendations.

The Committee recommended that this work should be progressed and concluded as soon as possible. This work would more easily allow the ACCC to examine whether the denial of banking or payment services raises concerns under the Competition and Consumer Act 2010 (Cth). A due diligence scheme should be implemented no later than June 2022.


The Committee noted that there appears to be a lack of transparency around decisions taken by banks to de-bank businesses. The Committee was also concerned by suggestions that banks may find it convenient to de-bank businesses which could provide competition. However, without greater transparency around de-banking decisions, it is not possible to determine whether businesses are being de-banked for genuine reasons not linked to competition. While acknowledging the anti-tipping off provisions, the Committee is concerned about the lack of detail provided to some customers which means they can take no corrective action and they have no recourse.

The Committee recommended that a de-banking process involving the Australian Financial Complaints Authority should be developed (including an appeals mechanism) to provide increased certainty and transparency.


The Committee referred to the recently completed Treasury review into Australia’s payments systems, which included similar findings in relation to the issue of de-banking. The review included recommendations which would facilitate better access to key payment systems such as the New Payments Platform, allowing payment service providers the ability to circumvent the need to rely on a bank for access to payments systems.

The Treasury review recommended that the RBA develop common access requirements for payments systems in consultation with the operators of payment systems, and that these common access requirements form part of a new payments licence to facilitate access for licensees to those systems. The Committee noted that consultation is underway on the recommendations of the Treasury review in order to finalise a government response.


The Committee took evidence on several other issues, including the policy environment for neobanks, the impact of corporate law on new investment, and options for replacing the Offshore Banking Unit.

Given the recent changes in the neobank sector, including the closure of Xinja and the acquisition of 86 400, the Committee considered whether such developments threatened increasing competition or signalled the need for regulatory changes. After speaking with the key regulators, the Committee was pleased to hear that the ACCC did not see these changes as indicative of competition substantially lessening and noted that they would continue to closely scrutinise any proposed acquisitions of emerging competitors or challengers. The Australian Prudential Regulation Authority (APRA) told the Committee about its updated approach to licensing and supervising new authorised deposit-taking institutions (ADIs) following the review of APRA's ADI licensing regime which found there should be a greater focus on longer term sustainability to increase the ability to assert competitive pressure on incumbents. The Committee expects that this updated approach will lead to positive outcomes in the future for prospective banking licensees.

The Committee's issues paper for this phase of the inquiry sought options to replace the Offshore Banking Unit (OBU) that would maintain and enhance Australia's global position. The Committee was supportive of the suggestion by the Australian Financial Markets Association to replace the OBU with a Global Markets Incentive.

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