The bill will also seek to address the rise of central bank-issued digital currencies (CBDCs), most notably China’s e-yuan, which is the first CBDC to be issued by a major economy. Under the proposed laws, Chinese state-owned banks would be required to report on the use of e-yuan to the Reserve Bank and to banking regulator APRA.
E-Yuan is not yet available in Australia, but Bragg said the bill would ensure Australia is prepared for when it is.
The rapidly changing nature of the cryptocurrency industry means it is inherently difficult to regulate.Credit:Bloomberg
“We want to make sure we have all the reporting mechanisms in place. If the digital yuan became a popular option among unbanked people in the Pacific region, wouldn’t we want to have a good hard think about how we’re going to respond to that?” he said.
Australia is well behind many of its international peers when it comes to regulating cryptocurrency, with the US this week releasing a framework on what regulation in the country should look like and some individual states, such as Wyoming, introducing pro-crypto regulation.
Industry participants in Australia are highly supportive of further regulation, though some have raised concerns the rapidly evolving nature of the industry could mean any regulation introduced would fail to keep up with new developments.
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For example, last week the second-largest crypto, Ethereum, completed its long-awaited ‘merge’, converting the network from its power-intensive ‘proof-of-work’ consensus algorithm to a more efficient ‘proof-of-stake’ system.
However, due to the nature of the change, which will allow Ethereum holders to lock up – or ‘stake’ – their crypto to earn rewards, the chairman of North America’s financial regulator said the asset may now be considered a security and could be subject to new laws.
Bragg said issues such as this would always be a risk when trying to regulate emerging markets, but believes the bill has the right frameworks to cover most scenarios. “The bill was drafted in a way that we set out some ‘must-haves’, but the rest it leaves up to regulation, and it allows the minister of the day to make decisions,” he says. “There’s no way we could lock it all down in a bill because that would date the bill from the moment it’s passed.”
