Andrew Bragg drafts crypto bill to regulate stablecoin, digital yuan

Read more: AFR

Liberal Senator Andrew Bragg has drafted a private member’s bill that would regulate crypto exchanges and stablecoin issuers and place disclosure duties on Chinese banks dealing with digital yuan in Australia.

Senator Bragg, who chaired a parliamentary inquiry that made recommendations to regulate crypto last year, said progress had stalled under the Albanese government and called on it to urgently legislate protections for crypto users and provide legal certainty to developers.

The proposed law, the Digital Assets (Market Regulation) Bill, would require Australian-based custodians for digital assets. It would also create a special licensing regime for crypto market operators with capital requirements and other governance standards.

Treasury consulted on this market licensing regime before the federal election; detailed feedback has been provided that could inform the rules.

“It’s crucial that this industry comes out of the shadows into the light,” Senator Bragg told the Blockchain Associations Forum, a group of 53 blockchain and digital asset associations from 46 countries, on Sunday.

The Albanese government said in August it was keen to progress work on increased consumer protections for crypto, but was not specific on what they may entail or the timing. Meanwhile, it said Treasury would continue with a project to define the functionality and utility of crypto “tokens”.

CBA estimates Australians tipped $20 billion into cryptocurrencies in 2021. Much of this was lost as volatile markets crashed this year.

Terra Luna collapse

The proposed bill goes further than his Senate Select Committee on Australia as a Technology and Financial Centre recommendations by seeking to regulate stablecoins, digital assets whose value should be pegged to a fiat currency but which came under scrutiny during the $85 billion Terra Luna collapse in May.

The law would make it an offence to issue a stablecoin without a licence and includes requirements for Australian or foreign currency to be held in reserve, in an Australian bank, and for quarterly reporting to APRA and audits.

It would capture ANZ’s A$DC and other issuers. The Council of Financial Regulators has been discussing a regulatory regime for stablecoins at recent meetings, after RBA governor Philip Lowe said in July that stablecoins should be regulated like bank deposits. The US is close to regulating stablecoins.

The bill would also introduce provisions requiring a list of Chinese banks operating in Australia to report to the Reserve Bank and APRA transactions using China’s new e-CNY, a digital version of the yuan which is being piloted in China to push back on the influence of its private fintech companies.

The standards for crypto exchanges would include conduct regulation, segregation of customer funds, disclosure and cybersecurity requirements, and for key personnel to be based in Australia. ASIC would oversee the market.

China watch

In his speech on Sunday, Senator Bragg said he realised he had been too bullish on recommendations last year to progress a retail market “central bank digital currency” (CBDC), given “the privacy/big state implications. There are numerous privacy issues that could outweigh the benefits, and we should not have been as positive as we were.”

Chinese state-owned banks facilitating e-Yuan, a retail CBDC, should disclose data to APRA and the RBA given “China’s financial influence is particularly relevant in our Pacific region”, Senator Bragg said.

This should include the aggregate quantity of Australian businesses that have accepted e-Yuan payments, the number of digital wallets opened by Australian customers and the aggregate quantity of e-Yuan held in those wallets.

Suggesting the e-CNY presents issues for Australia’s national security, the bill would also require the RBA and APRA to provide annual reports to a responsible minister, the parliamentary joint committee on corporations and financial services, and the PJC on intelligence and security.

Separately, Senator Bragg said he had written to ASIC to ask it to examine advertising by crypto exchanges, including those featuring during the AFL and NRL finals.

BitcoincryptopaymentsSenator Andrew Bragg