Consumers using cryptocurrency exchanges and buy now, pay later services could be protected under what the federal treasurer, Josh Frydenberg, says would be the largest reform to Australia’s payments system in 25 years.
Frydenberg, in a speech on Wednesday, will promise a “comprehensive payments and crypto-asset reform plan” to boost innovation and consumer uptake of digital technologies.
Throughout 2022, the federal government will consult on potential reforms including a central bank digital currency, a licencing framework for digital currency exchanges, and fixing the problem of fintech de-banking (where banks refuse to offer services to certain individuals or businesses).
The package aims to give the federal government more oversight including enhanced powers for the treasurer to set rules for payments systems. The Coalition claims this would result in better fees, transparency and competition in the buy now, pay later market.
The crypto reform proposal promises consumers would be allowed to buy and sell assets in a regulated environment, with new rules for businesses that hold crypto assets on behalf of consumers.
Investment in cryptocurrency is becoming more mainstream in Australia, with the Commonwealth bank announcing in November it would allow customers to buy and sell cryptocurrencies on its platforms.
But the sector is still poorly regulated. On Tuesday, myCryptoWallet, one of the country’s highest-profile cryptocurrency trading platforms, reportedly collapsed.
Australia is already considered a market-leader in buy now, pay later technology, due to the success of ASX-listed Afterpay, stocks of which soared during the pandemic before it was bought for A$39bn by US fintech giant Square.
According to a draft of his speech, Frydenberg will tell the Australia Israel Chamber of Commerce and Industry the reforms would help business by addressing “the ambiguity that can exist about the regulatory and tax treatment of crypto assets and new payment methods”.
“For consumers, these changes will establish a regulatory framework to underpin their growing use of crypto assets and clarify the treatment of new payment methods,” he will say.
Frydenberg notes that up to 17% of Australians own cryptocurrency, warning that without regulatory changes it will be “Silicon Valley that determines the future of our payments system”.
“Australia must retain its sovereignty over our payment system. These are significant shifts that we need to be in front of.
“What is clear is that if we embrace these developments, Australia has an enormous opportunity to capitalise on the convergence between finance and technology.”
Frydenberg cites the fact Australia’s tech sector already generates $167bn in output and employs 850,000 people.
There are more than 220 million participants in global crypto markets, with assets now worth over US$2 trillion.
“Australia has an opportunity to be among the leading countries in the world in leveraging this new technology,” Frydenberg will say in Wednesday’s speech.
Much of the reform package is still to be determined in consultation with industry including a “strategic plan for the payments system” to be delivered by mid-2022. A federal election is due by May.
The commonwealth plans to consult financial regulators, states and territories to address the issue of “debanking”.
Consumer Action Law Centre chief executive, Gerard Brody, welcomed the consultation as “an opportunity to ensure [Buy-Now Pay-later] is regulated effectively and consistently with other credit products, to address the significant risk of debt and financial stress associated with these products”.
“There is no doubt that crypto exchanges need to be regulated more akin to banks—these entities are now holding significant sums of peoples’ money and investments, and there needs to be accountability,” he said.
In August 2019, Frydenberg set out a timetable to legislate the recommendations of the Hayne royal commission into the banking and financial services.
In January 2021, Guardian Australia revealed that more than half of the recommendations had either been abandoned or were yet to be fully implemented.
