Dean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | Link to this | Hansard source

I rise this morning in support of the Digital Assets (Market Regulation) Bill 2023, which addresses a key aspect of our ever-evolving financial landscape. My colleague Senator Bragg's private senator's bill is a testament to the coalition's commitment to protecting consumers and instilling confidence in investors. It acts where the Albanese Labor government has hesitated and failed. At its core, this bill regulates the gatekeepers of the digital asset industry. It introduces a comprehensive licensing structure accompanied by authorisations that will in turn impose a set of obligations on licensees. These obligations, to be developed in consultation with industry stakeholders and the broader community, are essential components of the robust regulatory framework Australia needs. Included in these obligations are minimal capital requirements designed to create a financial buffer in scenarios of economic downturn. This proposed legislation also emphasises the segregation of customer funds, ensuring that these funds remain distinct from corporate funds even in the unfortunate event of a digital currency exchange or custody service declaring bankruptcy.

Most notably, Senator Bragg's bill introduces governance standards that elevate the digital asset industry to the level expected of other financial services and products. Disclosure requirements, both to participants and government agencies, serve as a transparency mechanism, building and maintaining trust and accountability. Stringent record-keeping and reporting requirements will provide a comprehensive overview of operations.

It's important to stress that this bill is not just a theoretical exercise; rather, it represents a response to real-world challenges and events. Recent failures in prominent digital asset exchanges such as FTX, MyCryptoWallet and Blockchain Global Limited highlight the urgent need for consumer protections. This proposed legislation would have safeguarded consumers during these crises.

To ensure effective operation, the bill empowers ASIC to monitor and enforce licensee requirements. Civil and criminal penalties are integrated into the legislative framework, serving as a deterrent against potential misconduct. The bill brings clarity to the sometimes murky waters of digital assets by providing clear definitions of digital assets, digital asset exchanges and stable coins. This regulatory certainty is essential to fostering a conducive environment for innovation while ensuring the protection of investors.

The economics committee's examination of the Digital Assets (Market Regulation) Bill 2023 shed light on the pressing need for a comprehensive regulatory framework in the digital asset space. Stakeholders, including Blockchain Australia, Ripple and Kraken, have acknowledged the bill as a foundational step towards regulatory certainty and affirmed its significance in shaping Australia's transition to a digital economy. Support for the bill stems from the understanding that it effectively addresses critical policy issues with the flexibility and practicality required by a rapidly evolving sector. Importantly, recommendations from stakeholders and the committee demonstrate a collaborative effort to enhance and refine the bill now before the Senate. Suggested amendments to exclude NFTs from the definition of 'regulated digital assets' reflect a commitment to a regulatory framework that aligns with technological advancements, while the call to extend the transition period from three months to nine months would provide businesses and regulators the necessary time to adapt and comply with the new regulatory regime.

The time has well and truly come for this bill. The Digital Assets (Market Regulation) Bill lays the groundwork for a secure, transparent and thriving digital asset industry in our country. It's a meaningful step towards fully embracing the opportunities presented by emerging technologies while providing the necessary consumer safeguards. I commend Senator Bragg for his efforts, and I commend the bill to the Senate.

Murray Watt (Queensland, Australian Labor Party, Minister for Agriculture, Fisheries and Forestry) Share this | Link to this | Hansard source

The government does not support the Digital Assets (Market Regulation) Bill 2023. The Albanese government is working to regulate digital and crypto asset platforms in Australia. These platforms hold billions of dollars of assets for Australians while providing services such as trading and staking. While innovation in this sector is critical to enabling growth and competition in Australia's financial sector, failures and vulnerabilities of these platforms have increased the need to regulate to protect consumers. The coalition failed to regulate crypto comprehensively while they were in government. The private member's bill put forward by Senator Bragg is not up to scratch, according to industry feedback to the Senate inquiry. There is undoubtedly, though, a need for change.

Interest in digital and crypto assets has grown rapidly. Around one to four per cent of Australians own some form of crypto. I might point out I'm not one of them. I've never engaged in that practice in any way whatsoever, but many do.

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

Why are you so defensive?

Murray Watt (Queensland, Australian Labor Party, Minister for Agriculture, Fisheries and Forestry) Share this | Link to this | Hansard source

I'm an old-fashioned banking guy, I'm afraid. The most common way for Australians to access these tokens is through digital asset platforms. These platforms hold billions of dollars of assets for Australians, exposing them to significant risk. Collapses of digital asset platforms both locally and globally have seen Australians lose their assets or be forced to wait their turn amongst long lines of creditors. The Albanese government's reforms seek to reduce the risk of these collapses happening by lifting the standard of their operations and increasing their oversight. Further regulation will achieve three goals: firstly, introducing a framework for industry innovation and growth; secondly, providing certainty and clarity for industry; and, thirdly, protecting consumers and their assets. Consultation is currently being undertaken, and the feedback from industry so far has been positive.

This is in stark contrast to the feedback on Senator Bragg's bill. As the Senate Economics Legislation Committee inquiry report shows, Senator Bragg's 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'. The bill 'lacks the detail and certainty that investors, consumers, and the industry' require. The bill 'fails to interoperate with the established regulatory landscape', creating a regulatory arbitrage concern and resultant adverse outcomes for consumers. The bill would add unnecessary complexity between its proposed licensing regime and existing Australian financial services licensing requirements. The bill would create undue regulatory burden by establishing multiple licence categories, and it leaves significant details to delegated legislation which has not been presented with the bill for consideration.

The Albanese government's regulation proposal will seek to leverage existing Australian financial services laws. It would require digital asset platforms that hold over a certain threshold of Australians' assets, being $1,500 for an individual or $5 million in aggregate, to obtain an Australian financial services licence. The Australian financial services laws are a time tested and well-understood framework to mitigate risks involving businesses holding or utilising clients' assets. Digital asset platforms would need to meet all general licence obligations, consistent with other licence holders.

The Albanese government's focus in this space is born out of our commitment to better regulate for consumers. Australia's regulators are strengthening their focus on crypto-asset providers to make sure they meet their obligations to Australian consumers. The Australian Securities and Investments Commission has increased the size of its crypto team and is strengthening enforcement measures. The regulator is taking legal action where it identifies crypto offerings being marketed without the appropriate credit or financial services licence. ASIC is also ensuring that risks to consumers are appropriately disclosed. Digital currency exchanges are regulated by AUSTRAC under the Anti-Money Laundering and Counter-Terrorism Financing Act for the purposes of preventing and detecting money-laundering and terrorism financing. The Australian Competition and Consumer Commission is also stepping up efforts to prevent scams, including those involving crypto-assets.

As I say, we're also focused on reducing scams. In 2022, Australians lost an estimated $3.1 billion to scams, an increase of nearly 80 per cent compared to 2021. I want to commend the Assistant Treasurer, Stephen Jones, who I know has put a lot of work into the issue of scams, which is confronting so many Australians. Of that total, the ACCC's Scamwatch noted that more scammers are seeking payment via crypto, with reported losses via this payment method totalling $221 million in 2022. That's a 162 per cent increase from a year earlier.

The government has committed to taking action to combat scams and online fraud. To support this commitment, the government is providing $86.5 million in funding for a range of measures, including to establish the National Anti-Scam Centre in the ACCC as a world-leading partnership between government agencies and industry, facilitating real-time data sharing and coordinating the prevention and disruption of scams. The centre will also raise consumer awareness about the risks of scams. The National Anti-Scam Centre commenced operations on 1 July this year. In addition, we're boosting work by ASIC to identify and take down investment scam websites. Investment scams related to crypto are a significant component of the total number of scam websites. Finally, we're introducing new industry codes outlining the responsibilities of the private sector, including banks, telecommunications firms and digital platforms, in relation to scam activity, including crypto scams.

As you can see, Mr Deputy President, the Albanese government does take these issues seriously. There is a range of work underway. But, for the reasons I've outlined, we won't be supporting this bill. It comprehensively fails to deal with the real issues, including those that were ventilated at the Senate Economics Legislation Committee inquiry.

Gerard Rennick (Queensland, Liberal Party) Share this | Link to this | Hansard source

I too won't be supporting this bill, the Digital Assets (Market Regulation) Bill 2023. I don't believe in digital currency—I think it's a stepping stone to the social licence—and I believe the currency should be controlled by the government of the day. I will stand here and tell you that I do not want the government in the family home, the boardroom, the doctor's waiting room or the classroom, but there is one thing I do think governments should regulate, and that is the currency.

Digital currencies are used to traffic drugs, to traffic children and to traffic weapons. There is no way that ASIC will ever be able to keep up with the tracking of digital currency. ASIC can't even do its job properly now. The idea that we are going to regulate digital currency is just a fantasy. We may as well have a market for unicorns and fairies if we're going to try to regulate it, because that's all a digital currency is—a world of bytes, a world of make-believe.

If we want to get this country back on its feet, we need to start producing real goods and services. We need to build infrastructure. We need fewer white-collar spivs in their ivory palaces in Sydney and Melbourne. We need more people back on the tools, not trading imaginary figures on a computer screen. It's very important that we understand how important controlling currency is. It's actually one of the reasons why—and I'm one of the few people in this chamber who believe this—the RBA should come under the control of the Treasurer and should not be independent from government.

I'll just read out the history of coins in the early colony, because controlling currency is everything. The first colony of modern Australia didn't really have its own currency for the first 17 years, and, if you want to regulate and control your country, you've got to have a currency. This describes currency in the early settlement:

The coins in the pockets of the passengers on the First Fleet were a mixture of currencies from all around the world and included English guineas, shillings and pence, Spanish dollars, Indian rupees and Dutch guilders. It was confusing to try and use these coins to trade because no one knew how much they were worth when compared to each other.

This coin confusion meant that other ways of trading were used. People bartered for goods and services with anything they had—food and rum became popular items to trade.

We all know what happened with the Rum Rebellion. It literally went the proverbial up. Luckily enough, we had Lachlan Macquarie, who came along in 1810. He was the first governor to see Australia not as a colony but as a country. He knew that if you wanted to be a good governor for your country you needed a military to defend your borders and provide law and order, you needed a taxation system and you needed a monetary system. He introduced the holey dollar, and that holey dollar was used to fund the Sydney Hospital and the Sydney barracks, which still stand in Macquarie Street today. That is what we have to do, as good government involves regulating and controlling your currency.

I want to repeat: when it comes to the government going into your personal lives, I'll fight that any day. But when it comes to defending the right of the government to control your currency, we have to make sure that that is in the control of the people, because the history of monetary policy is the history of wars. If we go back to the great patriots of 1776, that was a currency war, believe it or not, because in 1764 the British imposed the Currency Act. That was where they told the American colonies they couldn't use the colonial scrip. As Benjamin Franklin said, that was the reason for the Revolutionary War. If you're not allowed to use your own scrip, your own paper—let's not forget that all currency is is an arbitrary construct, whether it's a digital form of currency or a piece of paper. All that indicates is that you should be able to swap that for something that is tangible.

We've got to get back to basics here. If you're printing this stuff out of thin air, you've got to have very tight regulations around it. The British imposed a Currency Act on the American colonies. If you can't print your own currency, you've got to borrow a currency. If you've got to borrow a currency, that means you've got to pay interest on that currency. Of course, that meant the wealth was going out of the colonies and it was going back to Britain. We saw the same thing happen 200 years later in 1973 with the creation of the petrodollar. I'll call it the petrodollar. Most people think the US dollar is owned by the great people of the United States, but that's not true. The Federal Reserve is privately owned, and when any country uses US dollars they are effectively paying interest to the private banks that own the Federal Reserve. Yet again, I have a problem with that, and I'll say to my good friends in the United States: take back control of your printing press, because you didn't realise this in 1913, but those private bankers won the day. So it's very important that we get this right.

I want to stress it, and I'm going to go through the history now, because it's very important. We'll go from the Currency Act and jump a hundred years. The whole history of the United States through the 19th century was all about who was going to control the currency—the private sector and the private banks or the government of the day. In 1896, a bloke by the name of William Jennings Bryan gave a speech known as the 'cross of gold' speech about silver and gold. Interestingly, he went up against William McKinley. He lost that election, but he ended up staying in the US Congress and became Secretary of State under Wilson in 1912. Interestingly enough, he became immortalised in a book known as The Wonderful Wizard of Oz: he was actually the lion. 'William Jennings Bryan' rhymes with 'lion', and The Wonderful Wizard of Oz was a story about the history of monetary policy. Effectively, Dorothy represented the American people, the Tin Man represented the worker and Scarecrow represented the farmer. In the original story, the Yellow Brick Road represented the gold and Dorothy wore silver slippers, not ruby slippers. Emerald City was the colour of the US greenback, and the person behind the curtain, the Wizard of Oz, was the symbol for the central banker.

That's what we have today, these nasty central bankers that operate in the background, and we know that because in estimate I asked the current governor, the deputy at the time, Michele Bullock, for the minutes between the RBA and the Bank for International Settlements. If you've never heard about the Bank for International Settlements, they are the central banker for central banks. Michele Bullock wouldn't give me those minutes. I think it's a disgrace to refuse that to a senator, a person elected by the people to represent the people. It's disgraceful that a public and unaccountable independent governor will not give the minutes of those meetings to a senator who wants to share the minutes with the Australian people.

That's not the only sneaky business the RBA is up to. As I've said before, I've got the serial numbers and the dates of minting of our gold bars that are held in London, and all those gold bars have been refined since 2014, some as late as 2020. The reason why the central banks don't want you to get hold of the gold is that that is a tangible store of wealth. If people ever found out that the real medium of exchange is gold or land, which are hard assets, the stuff that matters because paper deflates away—it's currently deflating away at seven per cent a year—you would find the people would be up in arms. Trust me, if you look at the Commitments of Traders report—I look at it every Saturday morning to see what's going on with gold—you will notice that that is also manipulated. Interestingly, as we went through September, the number of shorts held by the banks was decreasing. It decreased right down to the first week of October, and since then it has rapidly increased. I'll let you guys join the dots on that one.

We'll jump forward to 1913, when the Federal Reserve was created. It was set up as an independent privately owned bank. Needless to say what happened after that was that World War I broke out the year after that, and Germany went on to lose that war. They had their bank nationalised after World War I, and the German people were forced to repay the debts from World War I. That led to World War II, and interestingly enough after World War II the Bank of England, which was privately owned, was also nationalised. I say this to my good British friends: 'You do realise that you lost World War II. You got shafted because your Bank of England, which should not have been privately owned but was, was nationalised and then the debts from World War II were stuck onto you British people.' It took them 60 years to repay the debts to the Federal Reserve. That is how the wealth from the Old World went to the New World.

We jump forward, and in 1953 a great US president—probably my favourite, along with Kennedy—gave a speech called the 'Chance for Peace'. In the last paragraph he said, 'We will not be hung on a cross of iron.' That was his reference to say that all wars are bankers wars. We know his speech in 1961 where he called out the military industrial complex and the scientific and technical elite. He was onto this way back in '53, and he knew what he was talking about. This bloke commanded D-Day, was head of NATO, was president for eight years and headed Columbia University. If he says there's a military industrial complex, trust me there is a military industrial complex. It's interesting that in '53 he mentioned that same thing. My point is that the control of the printing press has been fought for for years and years and years, and we cannot let that go into the hands of unnamed operatives who will actually use that.

We have issues with ASIC and other watchdogs all the time. This will end up in tears. I read this morning that there are allegations that the current tragedy happening in the Middle East has been funded by cryptocurrency in terms of buying weapons. We cannot allow this stuff to go underground. It's incredibly dangerous, and it takes our eye off the ball. True wealth is the stuff we see in front of us. It's the production and capacity to produce goods and services. If we go back to 1971, they dropped the gold standard in the end. They had to drop the gold standard because of the Vietnam War, when they were printing too much money and couldn't keep up with gold. Needless to say inflation took off because they were printing money, which does increase demand, but they weren't using it to increase supply. This is just like during COVID when we printed $300 billion and paid people to stay at home. Had we printed $300 billion and used it to build infrastructure, which increases the supply of goods and services, we would not have had this inflation problem and we would have been able to keep people in their jobs and controlled inflation. It's interesting. The petrodollar was set up in 1973, and of course the bankers who run the Federal Reserve couldn't have all the money going to the people selling the oil in the Middle East, so they had to come up with a way to clip the ticket and get the money transferred back to the US. They came up with the petrodollar, which basically is the biggest physical commodity in the world. Of course, the biggest paper commodity in the world is the US treasury bond market.

We've been brainwashed. I myself was brainwashed. I knew it was never right, and I've spent my whole life trying to get to the bottom of it. We're not allowed to print money, and I always found that a very difficult thing to understand, because all money is printed. All money is an arbitrary construct; all money comes out of thin air. The question is: if you are going to print money out of thin air, how do you do it in a responsible manner? The responsible manner, of course, is to match it against an asset that comes out of thin air. The assets that come out of thin air are the rain, the sunlight and the soil. As we know from the words of our national anthem, wealth comes from toil. If we go and farm the land, dam the water and build the power stations to dig up the coal, uranium, gas or whatever, we create wealth from nothing. That is what we must do.

This is the problem with cryptocurrency and digital assets, apart from the social credit that will come along with it later on. There is no security against the hard assets. That is what we must do as a government, and it's what the RBA must do. They must look at quantitative easing—and that was a recommendation in the 1937 banking royal commission—as a way to stimulate growth in this economy. If we're going to increase demand by jumping from 20 million people to 26 million people, with another half a million people having come in the last 12 months, we've got to increase supply. The only way we can do that is by tying our currency to hard assets. That is why we need an infrastructure bank in this country that is only for those seven sovereign assets: dams, power stations, road, rail, ports, airports and telecommunications.

I read in the paper just yesterday that the states are saying they don't have any money to build infrastructure. You don't need money. If you're a sovereign country and you have title over all this wealth, you can issue equity. We've been brainwashed into thinking that governments can only raise capital by issuing bonds. What's the biggest market in the world? It's the US treasury bond market. Where does the US treasury bond market come from? It comes from the Federal Reserve. And who owns the Federal Reserve? It's the private banks. So, every time we build a dam in this country—for, say, a billion dollars—and go out and borrow a billion dollars in petrodollars from private banks offshore, the first billion dollars we create in wealth we've got to repay offshore. Then they charge us another, say, four per cent interest for another 25 or 50 years. That's another $1 billion to $2 billion going offshore.

We have to start getting back to producing real goods and services in this country. We've got to get those white-collar traders out of those ivory palaces in the big cities and get them back out there building infrastructure. If we go ahead and somehow try to legitimise this digital currency which we will never be able to regulate or keep up with, we are going to a fool's paradise. We're going the wrong way. I will be voting against this bill, because we need to get back on the tools, and we need to build this country in the same way our forefathers did.

Matt O'Sullivan (WA, Liberal Party) Share this | Link to 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.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

I wanted to speak following Senator O'Sullivan and associate myself with his remarks, which were well made and balanced. I also want to commend Senator Bragg for bringing forward this important piece of legislation, the Digital Assets (Market Regulation) Bill 2023. It is urgently required.

It is the role of the parliament to legislate where required, and what we've seen is an industry that is moving faster than government. We've seen an industry that is engaged in currency transfers. Digital assets across the board are moving faster than our regulators. It is unfortunate that the government has taken the road of inaction, as is their usual form—very slow reviews and inaction on something that is moving quickly. It is imperative that the Australian government move to regulate digital assets, because, in the absence of that, Australians are left unprotected. And this is happening right now.

We know that cryptocurrency is being used on the dark web. We know that it is being used by drug traffickers and we know that it is being used in all sorts of nefarious activities—as well as appropriate ones; I'm not suggesting that that is its only purpose. But the absence of appropriate regulation leaves Australians unprotected and it leaves criminal elements able to act with impunity. If Minister Jones is unwilling to act, then it is the responsibility of people like Senator Bragg, who is well informed and up to date on matters such as this, to bring forward private senators' bills, and I really do commend him for that.

We have seen that it is possible for the government to move quickly when necessary. We saw recently the bipartisan approach to national security around the placement of an embassy. We have seen other occasions when the government has been forced to take urgent action to protect Australia's interests and there has been bipartisan support, both during the term of this government and previously. This is another element where it is the responsibility of government to provide some leadership, to move quickly to protect Australians and Australian businesses. As I say, Senator Bragg, who has deep knowledge in these areas, has taken that leadership role.

There has been discussion already about the Digital Assets (Market Regulation) Bill 2023, which creates a licensing regime for digital assets, with custody, disclosure and minimum capital requirements that will give consumers protection and the market certainty. This bill proves that an Australian crypto bill is entirely viable. It builds on the work of the previous government and picks up the work of comparable jurisdictions. It would provide a legislative framework to regulate digital assets. This is absolutely achievable. The inaction by the government has forced the regulator, ASIC, to utilise the powers that it does hold to the extent that they apply to digital asset-type products, but the regulator cannot make the law, and so we have left the regulator hamstrung in this regard in managing cryptocurrencies and digital assets. ASIC has no power to protect consumers without appropriate regulation.

It's no secret that the government has been flat-footed on regulatory reform in areas of society and the economy that are moving more quickly than the government is able to keep up with. It was a shocking situation last October when there was an inability for NOPSEMA to have appropriate regulation to make decisions on important economic investments in this country. The government has remained flat-footed and done nothing to provide greater certainty and transparency around that kind of regulation. So it is no surprise that here in the crypto world the government has remained flat-footed, confused. I'm not sure exactly what it is that they think their reluctance to move will achieve, apart from putting Australians—Australian consumers and Australian businesses—into a more exposed position. But they are also not supporting our legal enforcers. Where are the regulations and the legislation that would provide those agencies with the tools to be fighting these criminal underworld gangs? Regulations and legislation would help ASIC, in the economic sense, and even some of our other enforcers—the Australian Federal Police and others. This absence of regulation leaves our enforcers without the tools to defend Australians against the sort of activity that is going on.

Under this proposed legislation the licence holders will be subject to various obligations, and it would be developed in consultation with industry and community. These obligations would include: minimal capital requirements to provide a buffer in downturn scenarios; segregation of consumer funds to ensure that those funds are not tied up with corporate funds in the event that a digital currency exchange or custody service declares bankruptcy; governance standards to bring the industry up to par with other financial services and products; disclosure requirements to both participants and government agencies; and of course record keeping and recording requirements. The bill would require minimum reserve standards to ensure that stablecoin issuers hold in reserve the full amount of their face-value liabilities on issue in accounts kept with an authorised deposit-taking institution in Australia. This would provide consumers with the minimum standard of consumer protection.

We are very proud of the stable banking system we have in Australia. It allowed us to work through several downturns, including the most recent supply shocks that we had during the COVID pandemic, and previously. It is shocking that we have a new currency system, a new area that consumers are exposed to, that remains unregulated. Consumers remain unprotected. And yes, I've already said that, and I will continue to say that, because it is shocking that the government remains flat-footed on what is a very basic protection element. We had a good fintech inquiry during the last government, very ably chaired by Senator Bragg, and the deputy chair was Senator Marielle Smith.

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

And I served on it, Senator McDonald.

Susan McDonald (Queensland, National Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

Yes. Senator Scarr was also a terrific contributor to that very technical Senate inquiry, which was looking at new technologies and new ways of banking and moving currency and finance around the world. And Australia is missing out. Australia has been beaten in this regard by many other jurisdictions, including Nigeria, which is not usually expected to be a financial powerhouse in something like digital currencies and cryptocurrencies. But they are outstripping Australia and taking action on managing this very issue.

This bill would require banks and financial institutions to make disclosures to ASIC and the Reserve Bank regarding to the use and management of foreign CBDCs in Australia. This is very important. This approach follows the one taken in the US but in a more expanded capacity. The protections would have safeguarded consumers during recent notable exchange failures, including FTX, ACX.io, MyCryptoWallet and Blockchain Global Ltd. This bill would have provided critical consumer protection. That's exactly what this bill aims to do. And it would empower ASIC, as I've already mentioned, to monitor and enforce licence requirements. It would empower the Parliamentary Joint Committee on Corporations and Financial Services with inquiry and reporting functions to ensure the appropriate implementation of the bill.

This is urgent. This action is urgent. In the absence of any sort of movement, apart from another review, then who are consumers expecting will protect them? There will be other failures. We know that. This is the world we live in. Yet Labor remains flat-footed on protecting anybody apart from their union mates and big super.

The bill has been described by Blockchain Australia as a 'foundational start towards a comprehensive digital asset regulatory framework'. There was vast agreement by stakeholders who gave evidence to the Senate Economics Legislation Committee's inquiry that the bill's approach is correct. So we have broadscale support for an important piece of legislation to address an issue that is looming large for consumers and for industry. But the government thinks that it's not important. They obviously didn't listen to the evidence that was provided to the economics committee, because there was broad agreement with the stated outcome of the licensing regime and many of the licensee obligations.

This lack of modern regulatory support we are seeing right across industry, we are seeing in the resources sector. We are seeing inappropriate environmental regulations. We are seeing inappropriate regulation for important CCUS projects. We see the government fund the Environmental Defenders Office to undermine their very own decisions. But they will not take action on providing greater certainty and transparency for industry. I see it in the resources sector, I see in the agricultural sector and now, of course, here we are seeing it in the banking sector in the absence of protection and appropriate regulation and legislation for this new world.

We are seeing a government that is much more focused on looking backwards. I think pretty well all of their talking points are focused on what the coalition did. They very rarely talk about what their vision is, what their future for Australia is. It doesn't exist in their minds. They're so busy looking backwards and taking orders from the unions and the super funds that they are missing opportunities to ensure that Australia remains a country with a First World standard of living. They are missing opportunities to ensure that we are receiving investment and good, well-paid and, in this regard, smart jobs, because this investment is going elsewhere. It's going to other countries that have appropriate frameworks for it, and instead Australia is left with just the criminal element of cryptocurrencies. Australia is left with the dark web drug runners, paedophilia rings an others who want to escape the attention of regulators, because they are unregulated.

The entire point of this bill is that digital assets are no longer a niche product. They're no longer something so rare and unusual. This industry has potential to disrupt traditional financial services and provide Australian customers and consumers with better, lower prices. It could establish a suitable framework to regulate digital assets and it's critical to embracing the digital economy. As one witness said, 'If Australia fails to adapt to and enable digital business models, these platforms will still be built, but they will simply be built in other jurisdictions or remain in dark parts of the economy, leaving consumers and investors exposed.' What a terrific summary of the threats and risks that Australia is exposed to if this legislation is not passed.

Linda Reynolds (WA, Liberal Party) Share this | Link to this | Hansard source

I too rise to speak on the Digital Assets (Market Regulation) Bill 2023. First of all, let me commend Senator Bragg for this bill. He's put a lot of thought, consideration and expertise into this bill and he has certainly filled the yawning gap that this Labor government has left. This bill itself creates a licensing regime for digital assets, with custody, disclosure and minimum capital requirements that will give consumers protection and the market the certainty that it needs—and it is certainly a market that is crying out for certainty.

Like so many other examples from this government, I've got no idea what they spent nine years in opposition doing, because, unless it was actually delivered with a nice red bow from the trade union movement or some of the industry super funds, they have been completely unable to govern across so many ministries. They have just not done the work and certainly do not understand the portfolios that they are now responsible for administering. There is no better example of this than a senator who does have the expertise and the mastery actually filling in the gaps where this government has failed. Unfortunately, because it wasn't their idea and their own minister, Minister Jones, was completely incapable of putting this bill together in the first 18 months of their government, halfway through their term they have still left this yawning gap, like so many other things.

They've come into government, and across so many portfolios there is review after review after review, which means inaction, inaction, inaction. Government means you have to make decisions. You have to understand what you're doing, and you have to make decisions, because, if you don't, you go backwards.

That is exactly the case now in this portfolio and in this industry. It was only two years ago that an EY report clearly demonstrated that Australia was on track for a crypto boom by 2030 and that the country's crypto industry could swell by up to 30 times its current size. That has come to shuddering halt and is now going backwards because this government is incapable of working out how to regulate this industry so that it can grow and so that we can attract investment in this sector here in Australia.

What are we talking about in this sector? Digital assets are a booming new asset class with thousands of unique economic opportunities that has the possibility to drive growth and create long-term jobs, particularly for the next generation of tech workers. Australia needs a robust system, but to achieve that—it is not rocket science; well, apparently it is to those opposite—Australia needs a robust regulatory framework to foster investment and ensure that customers are protected from fraudulent activity. Like any other sector where there's money involved, there will be fraud if it is not well regulated and people are not protected.

Now, halfway through their term, instead of working with the regulatory industry and regulating the industry to provide these opportunities for the burgeoning Australian financial sector, the Labor government are dragging their feet, putting the industry in limbo, when they should be nimble and able. They should have actually come in with a plan to do this. In fact, had they just implemented what we had on track in 2022, this would have been passed over 12 months ago, and we would now have a very different sector with far more opportunities. But they have just dragged their feet. Instead of innovation companies looking to Australia, they are now going elsewhere, where governments are promoting innovative products and are also providing the protections for those who are operating in this market.

Worse, after just 18 months of this government, productivity is declining. Real wages are declining, and the government is not doing anything that could stimulate the economy and provide well-paying jobs, especially for younger Australians in these emerging markets. Their pride and their incompetence mean that we are losing opportunities in this sector day by day—to grow this sector, to regulate the sector and to provide new career opportunities to tens of thousands of younger Australians.

What Labor have shown themselves to be incredibly good at is not making decisions, not leading and not governing, but they are good at conducting endless reviews and having catchy terms in media releases. The substance of producing legislation that will improve the lives of Australians is absent. After 18 months of this incompetent minister, they were not able to produce something as fundamentally important as this. He had it all there. I don't know what he was doing—sitting there looking at it? Did he throw it in the bin? But now we the parliament are doing the job of the government by bringing forward this comprehensive and outstanding piece of legislation from Senator Bragg.

Australia, when supported—and sometimes despite not being supported by those opposite—has been at the forefront of technological innovation. Not many Australians know this, but Google Maps was actually created and invented here in Australia, as well as the flight box recorder, cochlear implants and hundreds of other products. When you support innovation here in this nation, Australians thrive.

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

Wi-fi.

Linda Reynolds (WA, Liberal Party) Share this | Link to this | Hansard source

And wi-fi. That's exactly right, Senator O'Sullivan. But, instead of just picking up where we left off in government or the current outstanding private member's bill, this government is giving a two-fingered salute to the tech industry here in Australia and saying: 'We are too proud. We are too stubborn.' Quite frankly, you are too incompetent to even just agree. Swallow your pride and say, 'This is a good bill, and this should be carried.' Australia needs innovation and not the stagnation that this new government—not so new anymore—is providing us, but we do need robust safeguards to ensure not only that the Australian financial services industry remains the most efficient and the safest in the world but also that it will provide opportunities for the next generation of Australians.

Let's have a little bit more of a look at the nature of this bill. What is in this bill to make those opposite so afraid of saying, 'Yes, this is the right thing for the Australian financial sector'? The bill itself is designed to regulate the digital asset gatekeepers, which are the exchange operators and asset holders, and also to impose industry standards. It does so by creating a single licensing structure with various authorisations. Licence holders will be subject to various obligations, to be developed in consultation with industry and the community.

When you listen to those, they are such commonsense regulatory requirements. They are good practice. They are world practice. But those opposite ditched the proposal that we were developing and that we actually would have implemented 12 months ago had we retained government, but we didn't. Those opposite came in with Minister Jones, and what has he done? Absolutely nothing. Now we are bringing a bill forward, courtesy of Senator Bragg and the hard work the committee has done, to fill this gap. Still, those opposite are so proud that they would rather squander the opportunities in this sector than say, 'Yes, we will support this bill so that this sector can move on.'

What else does this do? In relation to stablecoins, the bill provides minimum reserve standards to ensure that stablecoin issuers hold in reserve the full amount of their face-value liabilities on issue in accounts kept with an authorised deposit-taking institution here in Australia. Think about that. That is such an important protection for Australians in relation to stablecoins. It is good practice. It is world's best practice, yet those opposite do not have a plan and do not support implementing this bill to protect Australian businesses and Australian individuals.

In respect of central bank digital currencies, the bill will also require banks and financial institutions to make disclosures to ASIC and the Reserve Bank regarding their use and management of foreign central bank digital currencies here in Australia. This approach follows the approach taken in the US but in an expanded and a more effective way. But, again, Labor are opposing this. Labor are opposing these protections, and it is a complete and utter disgrace.

The bill also provides critical consumer protections that would have safeguarded consumers during recent notable exchange failures, including FTX, ACX.io, MyCryptoWallet and Blockchain Global Limited. Everybody in this chamber is aware of those. This bill is actually designed to protect Australians from such fraud and crimes. The bill empowers ASIC to monitor and enforce licensee requirements and provides the requisite civil and criminal penalties available to deter such misconduct against Australians.

Sadly for Australians, this is yet another failure of those opposite. They didn't pursue the work that we had started and was well advanced in 2022. When they came to government, Minister Jones chucked it in the bin. Instead of actually implementing or just rebadging it as their own, he has done nothing for 18 months—nothing! Here you have, courtesy Senator Bragg, an outstanding bill which would get this sector going. It would provide the protections Australian individuals and companies need to operate safely and profitably. It would also be the signal, if passed, for foreign capital, which is now going elsewhere to other markets in this sector, to come here to Australia and to have the confidence to invest. By not implementing legislation of their own or this private senator's bill, those opposite are knowingly and deliberately—possibly just incompetently—making Australia a sovereign risk for foreign capital. You are not making it easy or possible for Australians to engage in this new economy safely and securely—shame on you. I don't think anybody could have imagined the damage those opposite have managed to wreak in the economy. We heard yesterday that through their incompetence they have had to let over 80 people out of detention—

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

Order! It being 12 minutes past 10, the time for this debate has expired.