Herbert Smith Freehills | Oct 28, 2021

The Australian Senate – Select Committee on Australia as a Technology and Financial Centre has released its Final Report on the following issues:

• how Australia should regulate cryptocurrency and digital assets in a manner which will promote innovation and attract investment while providing appropriate safeguards for investors and consumers (Chapters 2 and 3);
• de-banking particularly in the remittance, payments and digital assets sectors (Chapter 4); and
• other issues including options to replace the Offshore Banking Unit (Chapter 5).

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In relation to cryptocurrency and digital assets, the Committee recommended that the Australian Government:

• establish a market licensing regime for digital currency exchanges, including capital adequacy, auditing and responsible person tests under the Treasury portfolio;
• establish a custody or depository regime for digital assets with minimum standards under the Treasury portfolio;
• conduct a token mapping exercise to determine the best way to characterise the various types of digital asset tokens in Australia;
• establish a new decentralised autonomous organisation company structure;
• amend relevant legislation so that businesses undertaking digital asset ‘mining’ and related activities in Australia receive a company tax discount of 10 per cent if they source their own renewable energy for these activities;
• amend the Anti-Money Laundering and Counter-Terrorism Financing regulations to ensure they are fit for purpose, do not undermine innovation and give consideration to the driver of the Financial Action Task Force ‘travel rule’;
• amend the Capital Gains Tax (CGT) regime so that digital asset transactions only create a CGT event when they genuinely result in a clearly definable capital gain or loss;
• lead a policy review of the viability of a retail Central Bank Digital Currency (CBDC) in Australia.

In relation to de-banking, the Committee made the following recommendations:

• that the Australian Government enact a scheme to address the due diligence requirements of banks by June 2022;
• that the Australian Government develop a clear process for businesses that have been de-banked which is anchored around the Australian Financial Complaints Authority (AFCA) which services licensed entities; and
• that common access requirements for the New Payments Platform should be developed by the Reserve Bank of Australia, in order to reduce the reliance of payments businesses on the major banks for the provision of banking services.

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In relation to the Offshore Banking Unit issue, the Committee recommended that the Global Markets Incentive suggested by submitters should be implemented to replace the Offshore Banking Unit regime by the end of 2022.