‘Locked into the slow lane’: Crypto reforms knocked back

The government has missed a crucial opportunity to protect cryptocurrency consumers and promote investment, the opposition says.

A government-chaired Senate economics committee has knocked back a private senator’s bill that would regulate the crypto sector and impose minimum standards for digital asset exchanges, leading Coalition senator Andrew Bragg to accuse the government of driving investment offshore.

The Digital Assets (Market Regulation) Bill 2023, known inside the crypto industry as the ‘‘Bragg Bill’’, would create a local licensing regime for crypto exchanges, creating new minimum capital requirements and standards for cybersecurity and disclosure obligations.

Australia does not have specific cryptocurrency laws, instead relying on existing laws such as the Corporations Act and the Anti-Money Laundering and Counter-Terrorism Financing Act.

When in government Mr Bragg chaired a Senate committee that handed down a road map on crypto regulation in 2021, with Treasury then kicking off public consultations on custody and licensing requirements. Last September, Mr Bragg introduced a private senators’ bill that he said would protect consumers and promote investment.

On Monday the Senate economics legislative committee, which is chaired by Labor senator Jess Walsh and has a majority of Labor senators, recommended that the bill not be passed.

“The committee recommends that the Australian government continue to consult with industry on the development of fit-for-purpose digital assets,” Ms Walsh said in the majority report.

“The bill is at odds with the measured and industry-accepted approach the government is undertaking to ensure that current and new regulations are well considered and effective in supporting consumers and the digital assets industry.

Fronting committee hearings in July, Australian crypto exchanges including Kraken, Coinbase and Swyftx called for a fast-track of national crypto regulations. Picture: AFP

“Considering the evidence presented to the inquiry, the committee is of the view that the bill lacks the detail and certainty that investors, consumers and the industry should be provided with. Crucially, the bill fails to interoperate with the established regulatory landscape, creating a genuine concern for regulatory arbitrage and adverse outcomes to the industry.”

Mr Bragg said on Monday that decision would cost investment in the local crypto sector and that regulatory work had stalled since Labor won the federal election last May.

“Labor has run the digital assets agenda into the ground,” he said. “We are now locked into the slow lane.”

Assistant Treasurer Stephen Jones was contacted for comment.

Statistics from Swyftx show about a quarter of Australians own some form of cryptocurrency, but adoption has slowed somewhat over the past year.

“Now nearing the end of 2023, the government has shown no genuine interest in regulating digital assets,” Coalition members including Mr Bragg said in their dissenting report.

“There is no indication that draft legislation will be prepared within the next 12 months. What does seem clear, however, is that while our competitors are enhancing their regulatory systems, this government wishes to commission endless reviews with no clear finish line in sight.

“Minister Jones’ choice to go back to the starting block holds two major consequences for the Australian market. First, it has left consumers exposed to the risks of an unregulated market. Second, it has driven investment offshore.”

Coalition senators called on the Senate to debate and pass the bill. “Waiting on the government to act is not an option. That is why the senate should move to debate and pass this bill.”

Fronting committee hearings in July were Australian crypto exchanges including Kraken, Coinbase and Swyftx which called for a fast-track of national crypto regulations.

The debate comes during a bear market and a wave of uncertainty for the crypto industry globally which has been hit by regulatory scrutiny and depressed valuations, and the collapse of several exchanges including FTX.