Matt O'Sullivan (WA, Liberal Party) Share this | Hansard source

It's always good to follow my good friend and colleague Senator Rennick. He gave us a potted history of monetary policy just then, and you always learn something new whenever you hear from Senator Rennick. I appreciate his thoughtful contribution there. He is someone that should be taken seriously, because he's put a lot into understanding this area and presenting a pathway forward. On the topic of giving out bouquets, can I thank Senator Bragg for bringing this bill before the Senate right now. The Digital Assets (Market Regulation) Bill 2023 is an important piece of legislation that I hope will receive support in this place when it eventually comes to a vote.

I know that Senator Bragg is particularly passionate about this emerging digital market. I think it was one of the first things he did when he came into this place, along with Senator Scarr and I, back in 2019. Senator Bragg established an inquiry into this whole emerging field. That was four years ago, though, and we're now a long way down the track from that. It was a burgeoning technology four or five years ago. It's now certainly becoming very much established. So regulation in this area is well and truly overdue, so Senator Bragg bringing forward this thoughtful bit of legislation is very important. There is need for effective regulation in this area.

This is the first serious attempt by this parliament to look at regulating cryptocurrency and, more broadly, digital assets. While I very much appreciate Senator Bragg bringing it forward and it's absolutely his prerogative to do that and, as I said, I commend him for it, I would really love to see the government come forward with some leadership in this space, because it is critical that there be regulation provided in this area. But it seems that the government have put this issue in the too-hard basket or the go-slow lane. This makes sense, because it seems that issues of the economy are not something that the government is really willing to properly tackle. We know that those opposite seem to freak out every time the word 'economy' comes up. What they're not doing is managing it in a way that actually addresses the needs within the economy, be it the need to address cost of living or this area of important regulation.

Cryptocurrency is an emerging market, and it won't be going away any time soon. People have made serious money in crypto. There are some who have lost a lot of money too. It's not something that I've ever personally invested in, but I know people who have, and they've done very well out of their investment in crypto. But there is very limited regulation in this space, and it is necessary that we do it. As I said, it's not an issue that's going to go away just because we ignore it, and there needs to be proper regulation.

The primary objective of this bill is to oversee key players in the digital assets market, namely exchange operators and asset holders, by establishing regulatory measures and industry standards. This is achieved through the introduction of a unified licensing framework that encompasses various authorisations. The bill proposes that licence holders will be obligated to adhere to a set of requirements that would be collaboratively developed with input from both the industry and the community. This is important. It is important that we get both ends coming together. This includes minimum capital requirements to act as a safeguard in economic downturns; segregation of customer funds to prevent entanglement with corporate funds in the event of insolvency; governance standards aimed at aligning the industry with established financial services and products; disclosure of requirements for participants and government entities; and, finally, record-keeping and reporting obligations. Licence holders will be obligated to adhere to these requirements, and this is important, because without proper regulation, some would argue, it is like a free-for-all in this space, and there are no safeguards or guardrails to provide protection. So it's very important.

Concerning stablecoins, the bill sets forth minimum reserve standards to ensure that issuers maintain reserves equivalent to the full value of their liabilities. These reserves must be held in accounts with authorised deposit-taking institutions in Australia, providing consumers with a baseline of protection. In the case of the central bank digital currencies, CBDCs, the bill mandates that banks and financial institutions disclose information to ASIC and the Reserve Bank regarding the utilisation and management of foreign CBDCs in Australia, aligning with the approach taken in the United States but on an expanded scale.

The bill introduces crucial consumer protections, offering oversight through ASIC to monitor and enforce licensee requirements. It establishes civil and criminal penalties to deter misconduct, and it empowers the Parliamentary Joint Committee on Corporations and Financial Services with inquiry and reporting functions to ensure effective implementation. I want to underscore the importance of that in ensuring that there is oversight. Allowing that important joint committee across this place to have some inquiry and reporting functions would be very welcome, and it would provide the oversight that is necessary. We know that, when you cast light on issues, the sanitation from that sunlight can ensure that there are protections in place and that there's nothing untoward happening. So I think that's a particularly commendable element of this bill and one of the reasons why it should be supported.

A key outcome of the bill is the provision of regulatory clarity and certainty for investors, achieved through clear definitions of terms such as digital asset, digital asset exchanges and stablecoins. The licensing regime created by the bill operates independently of the Corporations Act. It's tailored to suit the unique characteristics of the digital asset industry.

The previous Liberal government aimed to establish a comprehensive legislative framework for digital assets in Australia by the close of 2022. As we know, we didn't win the last election, so we weren't able to follow through on that. But evidence presented to the Senate Economics Legislation Committee indicated that this proactive approach was attracting onshore investment and sending positive signals to the market. Even just indicating that that was the direction that the government was going to go elicited that sort of support—that is, Government, if you get on board and start doing this, we will start to see some movement in this space. It just happens naturally; markets follow these things.

We queried the potential impact of the current government's slow approach on future business decisions. Market participants informed the committee that they would seek licences from overseas sources. Witnesses emphasised to the committee that the loss of domestic investment could transform Australia into a technology importer rather than an exporter, compromising potential job creation and revenue generation within the country, as stated by Mr Michael Bacina of Piper Alderman, which is in the committee Hansard.

While the government's lack of proactive engagement on these issues persists, Australia, sadly, is significantly lagging behind competitors. Who are those competitors? There are competitive nations like the EU nations, the UK, Singapore, Hong Kong and Japan. Recent reports in the Australian Financial Review highlighted Australia's regulatory position as even falling behind that of Nigeria—Nigeria—in the crypto space. Come on, Australia; we've got to step up here. We can't allow our standing to fall. Sadly, we're seeing our standing fall across a number of measures compared with other nations. This is certainly one that we actually have an opportunity to take a leadership role in, and with that comes enormous economic opportunity for Australia.

Information obtained through questions on notice revealed that the Treasury Crypto Policy Unit is utilising public generative AI web-based applications like ChatGPT in its policy work. Additionally, members of the Crypto Policy Unit reported receiving unsolicited transfers of crypto tokens via AirDrop to all public addresses with transaction histories. In response to another question on notice, the Treasury was unable to specify the number of briefings provided to the Treasurer or the Assistant Treasurer on crypto policy.

When questions are asked of departments and officials, we expect an answer and we expect that that answer will enlighten the committee on the moves of government. In this case, the Treasury's answer was that they were unable to specify the number of briefings provided to the Treasurer or the Assistant Treasurer. This is an important matter of policy and regulation. It was surprising to the committee to not get a number, because you would think, in this important area of policy, that there would have been at least one meeting. I would have expected several on this important topic. Sadly, they're unable to specify the number. So we don't know. Maybe they did have lots of meetings, but we don't know. And, back to my point earlier, I think there should be oversight of this area; the joint committee should have oversight of the reporting and inquiry functions. That's important, and it would no doubt cause Treasury and the Treasurer and the Assistant Treasurer to have a greater focus on this.

The Labor Party's handling of digital asset regulation is cited as another instance of the government's misguided economic policy approach. The perception is that the government is only interested in policies that align with the interests of super funds or unions, and that's why we're seeing the industrial relations laws come through this place. Those opposite will no doubt argue against the point that I'm making here, but the fact of the matter is, when you look at the industrial relations bills currently before this parliament, the commencement dates for all of those measures are somewhere off into the future—some as early as six months time in June; some are even into 2025—but there is an exception to that, and that is the powers of trade unions in the workplace. Those regulations are right there to commence on 1 January, in just over a month's time. That bells the cat when it comes to what this is actually really about.

It does seem that the government is led by the nose by the trade unions and the super funds. When it comes to their lack of interest in this area, it's clearly because no-one in that space is calling for reform. So I'd encourage the government to listen to the evidence that has been brought forward through the inquiries ably led by Senator Bragg and the others that were involved over the last four or five years. Have a look at the evidence, listen to the evidence and respond in an appropriate way. The government really needs to get focused on policies that align with the interests of the broader economic considerations of the Australian economy, and this is an example of that.

I do commend this bill to the Senate. I hope that it can receive support when it eventually comes to a vote, and I do just want to conclude by again thanking Senator Bragg for bringing it to us. It's a very considered bill. It's comprehensive. It really covers a broad range of issues, and I think it will provide a terrific framework for crypto to be managed within this country and to ensure there are protections in place for people participating in it.