Australia’s Treasury has ventured into an innovative assignment that pledges to redefine the handling of digital assets in the country. As one of the leading financial regulators in Australia, the Treasury is implementing a ‘tech-agnostic’ and ‘principles-based’ methodology for the classification of digital assets. As articulated by an official from the Treasury, the intention is to provide a flexible, comprehensive framework that can accurately define the nature and function of crypto-assets.
Assistant Secretary of the Australian Treasury, Trevor Power, conveyed during the Australian Blockchain Week that the newly evolved system will categorize tokens based on their underlying purpose and utility. The intention is to devise a framework that is inherently adaptable and forward-thinking.
Power said that the token mapping paper spends a lot of time talking about the token, the system and, the value delivered for the very purpose of trying to structure whatever regulation such that it draws on those principles so then a token can be placed within that. Crypto assets that change their function and utility over time will likely be subject to review, according to Power.
In February, the Australian Treasury released the Token Mapping consultation paper. The Paper was considered a “foundational step” for installing a framework for reform for the crypto sector. It is essential to apprehend what the Paper purports to do, what it does not purport to do, the context in which it was published, and the potential next steps. If implemented, these next steps are likely to be transformative to the regulation of crypto assets in Australia.
The token mapping exercise set out in the Paper does not set out which crypto assets are or are not financial products. Nor does it propose a model for regulation. Instead, it seeks to identify the key activities and functions of products in the crypto ecosystem and map them against the existing “functional” definition of financial products. This exercise also aims to identify any practical issues which complicate compliance with the existing Australian regulatory regime.
The results of this consultation are expected to inform future consultations, including a consultation paper proposing a licensing and custody framework for crypto asset service providers (which is due to be released in mid-2023).
The Treasury considers token mapping to be essential to understanding how the crypto ecosystem interacts with Australia’s existing financial regulatory frameworks. Power said the token mapping exercise hadn’t been influenced by the recent parade of regulatory enforcement action by the United States Securities Exchange Commission. Instead, he further highlighted that the framework will be similar to the EU MiCA.
According to Chainalysis’ crypto adoption index, Australia ranks 40th globally for crypto adoption, with
retail transactions at centralized exchanges also ranking 40th globally when measured by purchasing
power parity per capita. Countries are simultaneously working on digital assets, thus it is important for countries to establish a well-integrated matrix, to create a system that eliminates criminal activities and develops a well-established financial ecosystem.
