Byline: Hannah Parker
According to a Treasury official, the Australian Treasury is taking a tech-agnostic and principles-based approach to defining crypto assets through its digital asset token mapping. This framework plans to easily classify tokens based on their purpose and function, providing a structured way to regulate them.
On June 26 2023, at the Australian Blockchain Week, an Australian Treasury Assistant Secretary, Trevor Power, told experts at 7Bitcoins that the token will be easily structured to classify them on their function and purpose. The official token mapping document focuses on understanding the token, system and delivered value to create regulations that align with these principles.
Trevor Power’ Views
The Australian Treasury Assistant Secretary, Trevor Power, highlighted that the goal is not to favour any specific token but rather to be neutral towards different technologies. Power said, “The token mapping paper spends a lot of time talking about the token, the system, the value delivered for the very purpose of trying to structure whatever regulation such that it draws on those principles so then a token can be placed within that”. He added, “It’s trying to be tech agnostic. It’s not trying to be token specific.”
Power suggested that crypto-specific legislation may be introduced in 2024, depending on how Australian lawmakers receive it. Power mentioned that crypto assets which evolve would likely undergo review and regulation if they become significant enough. Power explained that if these were to become very significant, they would graduate through the regulatory system. He concluded his thoughts by stressing the need for robust and technologically neutral regulation to account for changes in the crypto ecosystem. Token mapping should operate in a principled-based manner that can adapt to such changes.
The Australian Treasury considers token mapping crucial for understanding how the crypto ecosystem interacts with existing financial regulatory frameworks in Australia. It aims to balance innovation and consumer protection while providing clarity for digital asset companies operating in the country.
Power clarified that the token mapping exercise had not been influenced by the recent regulatory actions by the United States Securities and Exchange Commission (SEC). Instead, Power expects its crypto framework to align more closely with the European Union’s Market for Crypto Assets (MiCA) regulation. To attract a balance between innovation and consumer protection within a regulated environment, Power invited US and foreign digital asset firms to consider entering the Australian market as long as they comply with the token mapping framework.
Australian Treasury Assistant Secretary Trevor Power concluded, “There are two arms to every component of regulation. One is to make sure that that framework is there, and the second one is to make sure there’s room for the industry to grow and be innovative”.
Details on Token Mapping
On August 22nd 2022, the Australian government declared token mapping as a foundational step in the government’s multi-stage reform agenda that commits to developing appropriate regulatory settings for the crypto sector. Token mapping seeks to build a shared understanding of crypto assets in the Australian financial services regulatory context. This will explore how existing regulation applies to the crypto sector and inform future policy choices. Feedback was sought from stakeholders on the framework to tell a fact‑based, consumer-conscious and innovation-friendly approach to policy development.
From February 3rd 2023, until March 3rd 2023, the Treasury consulted a consultation process. The Treasury released a consultation paper on token mapping that identified four significant products in the crypto sector and their proposed taxonomy. Crypto asset service includes lending and borrowing, fiat on/off ramping, funds management, crypto token trading, gambling, mining/staking as-a-service and custody. Intermediated crypto assets, including stablecoins, are the closest to a wide-spread definition of tokens, rights or licences concerning event subscription or access, reward programs, intellectual property, consumer goods and services, fiat money, nonfinancial assets and government bond coupons.
Network tokens constituting peer-to-peer payment infrastructure are a new type of currency. Smart contracts exist on a spectrum from intermediated to public. Intermediaries use the former in providing a service; the latter is used by parties to remove the need for an intermediary. The paper proposes to start the discussion on the taxonomy and does not provide any legislative initiatives. Mid-2023, a similar paper on the possible licensing and custody framework for crypto will be released.
On February 1st 2023, His Majesty’s Treasury of the United Kingdom published a consultation paper for the United Kingdom’s upcoming crypto regulation. The long-anticipated 80-page document covers a broad range of topics, from the troubles of algorithmic stablecoins to nonfungible tokens (NFTs) and initial coin offerings (ICOs). According to the Treasury, the proposal aims to place the UK’s financial services sector at the forefront of crypto. There will be no separate regulatory regime for crypto as it will fall under the framework of the UK’s Financial Service and Market Act 2000 (FSMA).
Crypto companies will not have to report their market data regularly, however, they would be required to keep their data and always make it available. Ripple’s policy Director EMEA, Andrew Whitworth, said, “From today, the government should encourage further collaboration with the private sector to devise a comprehensive, risk-based framework, which aligns with international best practice”. The consultation was closed on April 30th 2023, where the British government welcomed responses from all stakeholders, including financial institutions, crypto firms, academics, consumer groups, representative bodies and legal firms.
Australian Treasury’s digital asset token mapping demonstrates a commitment to regulating and understanding crypto in a way that accommodates technological advancements while ensuring consumer protection. Australia aims to foster innovation and provide clarity for businesses operating within its crypto ecosystem by taking a tech-agnostic and principles-based approach. This approach is a significant step towards creating a comprehensive regulatory framework for cryptocurrencies within the country.