Drastic regulatory “shake up” for crypto and “buy now, pay later”

Australian Treasurer, Josh Frydenberg, has announced a Federal Government plan to overhaul Australia’s digital payments system and regulate fintech.

In a speech delivered to an Australia-Israel Chamber of Commerce luncheon yesterday at Crown Melbourne, The Treasurer described the Government’s “comprehensive payments and crypto-asset reform plan” as “the largest reforms to our payments system in a quarter of a century”.

A key focus of the reforms will be an attempt to mitigate the effects of the increasing convergence of technology, payments and banking, including growing “buy now, pay later” (BNPL) firms such as Afterpay and Zip Co, digital wallets operated by tech giants such as Apple Pay and Google Pay, and cryptocurrencies.

The motivation for the plan is that “without reform, Australian businesses and consumers could increasingly transact in environments that are largely unregulated from an Australian perspective, with any rules in play instead determined by foreign governments and large multinationals, including tech giants”, the Treasurer said.

On crypto currencies, the Government will investigate a safe custody regime in an attempt to give some protection to consumers trading on crypto exchanges.  The Board of Taxation will also be tasked with examining how these digital assets should be taxed.

However, the announced plans were sparse on details, with the particulars not expected until after various authorities consult and report back to the Treasury at the end of 2022.  A sceptic would point out that this is conveniently well after the next Federal election.  

Shadow Treasurer Jim Chalmers, while giving in principle support to regulatory clarity and consumer protection measures, described the announcement as nothing more than “a commitment to consult on the Government’s last consultation”.

It is more than a little ironic that the Treasurer’s announcement was made from a function held at Crown Melbourne, which has recently been found in the final report of the Royal Commission conducted by the Hon Ray Finkelstein AO QC to have engaged in misconduct that was “…disgraceful…illegal, dishonest, unethical and exploitative.”  The Crown misconduct includes facilitating money laundering and failure to identify customers, which are risks arising from cryptocurrencies that are often highlighted by the Federal Government as key reasons for reform.

The Treasurer’s announcement comes towards the end of a typically turbulent year in Australian crypto regulation, which we will summarise in a future blog article.