Jess Walsh (Victoria, Australian Labor Party) Share this | Hansard source

In rising to speak on the Digital Assets (Market Regulation) Bill 2023, as the chair of the Senate Economics Legislation Committee, I do want to acknowledge the important role that private senators' bills play in this place. They do allow us to examine issues and work out the best way to address them. I'd like to thank Senator Bragg for providing the Senate and the economics committee the opportunity to look at the really important issue of digital assets. What we heard loud and clear in the inquiry is that industry does support regulation, so that's a good thing. But we also heard loud and clear that regulation needs to be fit for purpose, it needs to be aligned with the existing financial services regime and it needs to be developed in a consistent process with industry. The bill that is before the chamber today doesn't meet those tests, and the committee therefore recommended that the bill not pass. Again, we do appreciate the opportunity that bills like these generate for discussion.

The government is developing a fit-for-purpose model and it is doing it collaboratively with the support of industry. What we heard in the inquiry is that industry wants a careful, clear pathway and process forward. They want us to get this right. They don't want us to get it rushed. The government's token-mapping consultation process has been endorsed and supported by industry. The role of token-mapping is to correctly identify and define the suite of digital assets to be regulated and, importantly, to identify where more regulations are needed. It's a really important process, as we did hear during the inquiry on this bill. It's needed to avoid the sorts of problems that submitters did talk to us about with this bill with regard to confusing definitions and demarcations on what digital assets and digital products are in or out. The token mapping exercise is also about looking at what existing regulations are working well, and the Treasury process received just shy of a hundred submissions. Importantly, this is just the start of the reforms and consultation that industry is welcoming. Next, the government will explore opportunities to reform licensing and custody of crypto assets, especially those that fall outside our existing financial service regulation. But we shouldn't forget that digital assets are regulated in this country today. Our corporation, consumer and competition laws regulate large sections of the industry, and our regulators—ASIC, AUSTRAC and even the RBA—work every day to monitor and act where required.

While industry agree that more regulation is a good thing, this bill in its current form is really not what industry are seeking, as they told us in the inquiry. Critically, this particular approach fails to work with our existing regulations and the familiar way of doing things for financial services providers. We heard that the bill creates a new, complex system of licensing that works in competition with the Australian financial services licensing and corporations law. As new as the technology may be, digital assets should play with the same rule book as everybody else. We heard during the Senate Economics Committee inquiry that the bill lacks detail and does not provide the certainty that industry is looking for. The committee found that the approach that this bill takes to establish a new bespoke regulatory regime, as outlined by the deputy chair in his remarks, was not well supported. FinTech Australia submitted:

…our members generally do not support a bespoke licensing regime separate to financial services licensing for crypto service providers.

The Australian Custodial Services Association told the committee that digital assets regulation:

…should look through the technology, and digital assets should be treated similarly to comparable, traditional financial products…

They support incorporating digital assets into the existing Australian financial services licensing regime to achieve consistency in licensing outcomes. The Australian Financial Markets Association said their preferred mechanism for digital assets regulation is for digital assets to be explicitly included in the definition of 'financial product' such that the existing licensing framework would apply. The crypto exchange platform Swyftx told the committee:

…the existing financial services licensing regime can be appropriately modified to accommodate crypto assets.

Similarly, Revolut Australia said that extending the provisions of the Corporations Act 2001, including the AFSL regime, to crypto products was 'logical'. Revolut Australia noted that the regulatory infrastructure already exists and that industry is already familiar with the role of ASIC in regulating financial services products.

We heard evidence from those who deal with digital assets every day that this bill is not the way to progress critical regulation and that they agree with the approach that the government is taking to get regulations right. The Financial Services Committee and the Digital Commerce Committee of the Law Council of Australia said:

…where possible and appropriate, digital asset service providers should be licensed under existing regulatory regimes, and if any new licensing regime is introduced, unnecessary duplication and uncertainty should be avoided…

Ms Jaime Lumsden, a partner at Hamilton Locke, submitted to the committee:

Broadly, we believe that Treasury's current consultation process provides the most appropriate forum to receive industry feedback and develop appropriate regulations for the crypto asset opportunity.

Witnesses told us across the inquiry that they support the approach government is taking. They talked to us about how welcome the engagement with industry is and that they think the government is listening. Again, what they really stressed is that we need to get it right, not get it rushed, and that we should learn from how regulation is being rolled out right now across the world. We need to look at our current regulations and see how they function, and we need to work together to identify where improvements are needed. This is the work that is underway.

We're not looking at how to regulate digital assets just for the sake of it. All the work the government is doing is to ensure that consumers are protected, to ensure investors have greater certainty and to support the industry in Australia to flourish. The government wants to ensure emerging risks are known and dealt with confidently. Confidence and certainty are what the sector spoke to us about over and over again in this inquiry. Confidence is what the industry needs. The benefit of digital assets will only continue to be felt across the economy as the government continues its consultation with industry towards a secure and certain regulatory path. With the growth of the sector, new skills and new high-value jobs will be welcomed across the economy.

To conclude, again, we welcome the contribution of Senator Bragg to this debate. Private senators' bills provide all of us in this place the opportunity to explore and canvass different ways of doing things. The committee found that the bill was not widely supported in the industry. We found that a bespoke model of regulation was not supported and we found that there was support for continuing to work with government.

The government is leading the work to regulate digital assets in Australia, and the digital assets sector is continuing to work with government. That's the process that we should support in this place to get the right outcome, not the rushed outcome. It's the process that I support.