Criminal cryptocurrency transactions will drop by 30 per cent by 2024.
The Australian Government has unveiled most significant reforms to Australia’s payment systems in more than 25 years. The reforms will ensure that Australia can capitalise on the significant opportunities being created by new payment and crypto technologies.
These reforms will build on our Digital Economy Strategy which is delivering on our vision for Australia to be a leading digital economy by 2030.
The reforms announced today will modernise the rules governing how Australians transact every day, including through new forms of payment like Digital Wallets and Buy Now Pay Later. The reforms also aim to give Australian’s confidence that businesses they engage with to buy, sell or hold digital assets like crypto are subject to appropriate oversight and licencing arrangements.
As part of these reforms, the Government will also investigate the feasibility of a Central Bank Digital Currency and seek to address the complex issue of de-banking.
Through our reforms, we will improve regulatory certainty for businesses, better protect consumers and investors and support competition by making it easier for innovative new entrants.
The Government’s proposals have been informed by three major reviews into Australia’s current regulatory framework; the Review of the Australian Payments System, the Senate Committee Australia as a Technology and Financial Centre Final Report, and the Parliamentary Joint Committee Corporations and Financial Services report: Mobile Payment and Digital Wallet Financial Services.
These reviews found that Australia’s payment system framework needs to be modernised to help drive innovation and spur competition, and that without reform, Australian consumers and businesses would increasingly transact in largely unregulated environments, with any rules determined by foreign governments and large multinationals.
The Government is responding to all 41 recommendations across the three reviews with a focus on centralising oversight of the payments system, including through enhanced powers for the Treasurer to set payment policy, and fundamental reform to strengthen business and consumer protections.
The reforms will progress in two phases, with the most urgent and immediately implementable reforms to be consulted on in the first half of 2022 and the remainder by the end of 2022.
COVID has accelerated and changed the way Australians and businesses engage with digital technologies. Many new and innovative technologies are emerging throughout the economy, impacting every part of our lives.
Nowhere is this digital disruption playing out faster than in the payments and cryptoasset sectors. Despite this disruption, the regulatory framework governing the payments system has remained largely unchanged over the last 25 years.
Given the pace of change and those leading it, if we do not reform the current framework, it will be Silicon Valley that determines the future of our payments system. Our regulatory architecture therefore needs to adapt, with greater strategic direction from the Government being required.
The Government’s comprehensive payments and crypto-asset reforms will firmly place Australia among a handful of leading countries in the world. In relation to payments, by mid-2022 the Government will have:
- Set out a strategic longer-term plan for the payments system, developed with industry and reviewed annually.
- Settled the details of additional powers for the Treasurer to set payment system policy.
- Determined the changes necessary to modernise payments system legislation to accommodate new and emerging payment systems, including consideration of buy now, pay later (BNPL) and digital wallets.
In relation to crypto, by mid-2022 the Government will have:
- Completed consultation on the establishment of a licencing framework for Digital Currency Exchanges to provide greater confidence in the trading of crypto assets.
- Finalised consultation on a custody or depository regime for businesses that hold crypto assets on behalf of consumers so that investors have greater confidence in the safe keeping of these assets.
- Received advice from the Council of Financial Regulators, working with other relevant agencies, on the underlying causes and policy responses to the complex issue of de-banking.
Importantly, by end-2022 the Government will have:
- Settled the framework to replace the current one-size-fits-all payment licensing arrangements with a functionally based framework adopting graduated, risk-based regulatory requirements.
- Received a report from the Board of Taxation on an appropriate framework for the taxation of digital transactions and assets.
- Undertaken a mapping exercise of existing crypto currencies and tokens to better inform consumers and others of the risks and benefits that arise.
- Examined the potential of so-called Decentralised Autonomous Organisations (DAOs) and how they can be incorporated into Australia’s legal and financial regulatory frameworks.
- Received advice from the Treasury and the RBA on the feasibility of a retail Central Bank Digital Currency in Australia.
The announcement comes as Gartner predicts criminal cryptocurrency transactions will drop by 30 per cent by 2024.
Contrary to popular lore, cryptocurrencies are not a haven for anonymous criminals. In fact, armed with smart blockchain analytics, it’s easier to follow money trails on blockchains than it is on legacy payment networks, however a circuitous route they may take, wrote Avivah Litan
Distinguished VP Analyst at Gartner.
“What’s still hard to figure out — for the time being — is the identity of the criminals using various blockchain addresses to move their stolen funds, especially when they use self-hosted wallets”.
