Paul Scarr (Queensland, Liberal Party) Share this | Hansard source

At the outset, I note Senator Walsh's generous remarks with respect to the contribution that Senator Bragg's private senator's bill is making to the debate, and I associate myself with those comments. But can I ask, is the process being rushed? In March 2022—not 2023—Treasury put out a consultation paper in relation to this very issue. One and a half years later, Senator Bragg, to his credit, has been compelled to introduce this private senator's bill because the government is on the go-slow.

If there is one area of public policy where you cannot be effective and efficient when you're on the go-slow, it's fintech and regtech, because the market is moving so quickly. Every day that passes whilst the government is on the go-slow in this area is a day where Australia loses opportunity and where Australian consumers are exposed to unacceptable levels of risk. It's been 1½ years since that consultation paper was released by Treasury in March 2022. Did we get any timeline from Senator Walsh, as chair of the Senate Economics Legislation Committee, with respect to Assistant Treasurer Jones's progress in relation to this matter? Absolutely nothing. It's on the never-never.

As Senator Bragg said, rightly, if this matter concerned the big industry consumer funds or the trade union movement there'd be a guillotine on this debate and we'd have 25 minutes. We would have been given the bill last night, given 25 minutes to debate it and it would be in effect. That's the reality. On this regulation, this critical area of opportunity for Australian investors and entrepreneurs and the risk in relation to Australian consumers, the government is on the go-slow. I have no expectation that government is going to introduce its own bill in relation to this matter during this term of parliament, so the only thing we're left to do in the Senate is consider Senator Bragg's bill because he's doing the government's job in relation to this policy area, and he's doing a mighty fine job with this private member's bill. So that's what this chamber's faced with: nothing, the go-slow approach, consultation upon consultation, people being consulted to death, and platitudes, but no action or effective regulation—just a huge, yawning lacuna or gap in this policy area. What this chamber should do is sensibly consider the very constructive contribution made by Senator Bragg to this debate.

From my perspective, there are a number of points to make. Given there is a gaping hole in the regulatory framework, there is an urgent need for regulation to protect investors and consumers, and it is not good enough that the government has failed to act in this area and has no constructive or positive timetable to fill that gap. Every day that passes when we don't have a regulatory framework which investors can adhere to and on the basis of which investors can invest with certainty is a day when investors will go offshore, because our competitors in this area, as Senator Bragg has made clear, are not on the go slow in-this policy area. They're actually doing constructive things. They're providing the frameworks and opportunities. If I learned anything from serving on Senator Bragg's fintech and regtech select committee—and I learned many things serving on that committee with Senator Bragg—it was that there will be talented Australian entrepreneurs with skill sets in this space who will only stay in this country for a certain period but will then become so frustrated at the lack of action by government in these areas that they will simply move offshore. They will take their enterprises offshore, they will take that opportunity for other Australians offshore, and Australia will miss that opportunity.

The second point is the need to protect investors and consumers. Senator Bragg's bill provides a framework in that regard. I also know—and I think it's important that we all consider this—about the points which Senator Bragg made with respect to how these new technologies in the fintech and regtech space can actually have a positive impact in disrupting the market and providing other opportunities for consumers and investors to achieve positive outcomes, not going through the tried and true methods. That's a positive thing as we consider market power across the economy, so I also agree with that sentiment.

When you look at what's being proposed by Senator Bragg in this private senator's bill, you will see it's quite a sensible regime. The first point is with respect to licensing, especially for those digital asset gatekeepers. It is appropriate that each of those gatekeepers who Australian consumers and investors would be engaging with be regulated and have licences with conditions which are suitable for the industry which they are the gatekeepers of. The points which Senator Bragg makes in his private senator's bill—which I agree with—in relation to the sorts of conditions and obligations which licence holders should have are things one would usually see in this investment context. The first is minimum capital requirements to provide a buffer in downturn scenarios.

The second point is on segregation of customer funds to ensure those funds are not tied up with corporate funds in the event that a digital currency exchange or custody service declares bankruptcy. There is a need to avoid the commingling of investor funds with the company's own funds which are used for other purposes. That's an issue which, as we've seen, has posed risks to consumers in other contexts. Just as it posed risks to consumers in the Sterling Financial case, so too does it pose risks to people in this space.

The third point is on government standards to bring the industry up to par with other financial services and products, and that's clearly appropriate. Senators need to remember that just because there is not a bill dealing with this issue doesn't mean that these issues aren't arising now in the economy. At the moment, they're unregulated. It's not as if these things aren't occurring now. There is an absence of bespoke regulation, so these issues are occurring in the economy now. People are being exposed to risks because the governance standards are not up to scratch now, and that is because there are no bespoke standards for this industry.

The fourth point that Senator Bragg has made with respect to licence obligations and conditions is the need to have sensible disclosure requirements for both participants and government agencies in this regard to make sure consumers and investors have the information they need to make a reasonable decision as to whether to invest or not or whether to use a particular gatekeeper or not. There is also a need for record keeping and reporting requirements to ensure that, if there are concerns or issues, the consumers, investors and regulators have access to the relevant information that's required to resolve those issues. These are all sensible proposals with respect to licensing requirements.

Senator Bragg, in his private member's bill, then deals with the important point with respect to consumer protections. Again I say to the government members that every day they're in consultation—and we've had a year and a half of consultation; we've been consulted to death in relation to this matter—is a day that consumers aren't protected. It's an unacceptable delay and an unacceptable lack of focus from Assistant Minister Jones in relation to this matter. This bill would provide critical consumer protections that would have safeguarded consumers during recent notable exchange failures, including FTX, ACX.io, MyCryptoWallet and Blockchain Global Ltd. This bill would empower ASIC to monitor and enforce licensee requirements, and the bill would also provide for appropriate civil and criminal penalties to deter misconduct. Again, that is something that is extremely important in the context of this issue.

Lastly, the bill would also empower the Parliamentary Joint Committee on Corporations and Financial Services with inquiry and reporting functions to ensure the appropriate implementation of the bill. I'm sure you would agree with me, Acting Deputy President Pratt—I don't think I'm being presumptuous in this regard—that that committee does extremely important work and acts in a very collegiate and positive matter in terms of discharging its functions, and I'm sure we would do exactly the same thing in the realm of this private member's bill. I should say, Acting Deputy President, that I very much enjoy working with you in relation to that committee and those issues, and I think we do make a very positive contribution in that regard. So, again, I applaud Senator Bragg for introducing that element into his private member's bill.

In conclusion, I think this place needs to reflect on the fact that, in the absence of this bill, there is a complete absence of bespoke regulation that is suitable for this industry at this time. There's a yawning gap, a lacuna and a hole in terms of the regulatory framework, both for investors, which would give them the certainty to invest in these opportunities, and for consumers, to protect consumers. You can keep consulting. You can consult the Australian business community and consumers within an inch of their life, but it's not achieving anything positive. The time to act was 12 months ago, not in 12 months time. We've already missed opportunities. Clearly, the government is not going to support this private member's bill, but, at the very least, the government needs to hear the message that their delay is unacceptable. The consultation needs to stop, and the action needs to start. It should have started on the day the assistant minister was given his portfolio obligations.

The opportunity is there. Every day that passes where we don't have the regulatory framework in place to take advantage of that opportunity is a day where opportunity is lost, and that opportunity is lost to international competitors that have built a regulatory framework. If they can do it in places like Singapore, why can't we do it here? What's the issue? Come on! We need to get on the bus and actually get this done. That's what we need to do. We need to be far more proactive in terms of opportunities in this space. Every single day that passes without the framework being in place, such as what has been proposed by Senator Bragg, is a day where Australian consumers are exposed to those financial disasters that Senator Bragg referred to, such as the FTX disaster. Every day is a day where they're not protected because we don't have the appropriate regulatory framework.

These points were certainly made by various witnesses who engaged in the consultation process. I would like to quote the RMIT Blockchain Innovation Hub Researchers. In their submission, submission 4, they said:

… if Australia fails to adapt to and enable digital business models, these platforms will still be built—they will simply be built in other jurisdictions, or remain in dark parts of the economy, leaving consumers and investors exposed.

Those aren't my words—those aren't Senator Scarr's words—and they're not Senator Bragg's words. Those are the words of the experts in the field, the RMIT Blockchain Innovation Hub Researchers, who know far more about this area of the market and policy than anyone else in this Senate chamber. In saying that, I note that Senator Bragg knows a hell of a lot more about this than I do. But these are the experts, and this is what they're telling us:

… if Australia fails to adapt to and enable digital business models, these platforms will still be built—

So, it's still happening. The government's going slow in terms of developing a regulatory model, but it's still happening. Again:

… these platforms will still be built—they will simply be built in other jurisdictions—

so Australia loses the opportunity altogether, and our investors lose the opportunity—

or remain in dark parts of the economy—

which means consumers are exposed to risk. Those are the two elements of this bill where I think the arguments put forward by Senator Bragg are extraordinarily persuasive: Australia's economy being able to take advantage of the opportunities, on the one hand, and consumers being protected, on the other. If we fail to act—this is the end of the quote—we are 'leaving consumers and investors exposed.'

I'm very, very happy to have risen in support of Senator Bragg's private member's bill.