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By mid-2022, the government will have set out plans for payments modernisation and new crypto laws in what “will be the most significant reforms for 25 years”, the country’s finance minister has confirmed.
Australia is set for a payments legislation overhaul as treasurer Josh Frydenberg has committed to updating current laws to accommodate for the rapidly changing industry.
“Given the pace of change and those leading it, if we do not reform the current framework it will be Silicon Valley that determines the future of our payments system,” said Frydenberg, echoing his counterparts in Europe.
Digitalisation trends will only accelerate and the uses for these technologies will only expand, he speculated, while delivering a speech to the Australia-Israel Chamber of Commerce.
Despite this disruption, the regulatory framework governing the payments system has remained largely unchanged over the last 25 years, Frydenberg pointed out.
By mid-2022, the Australian government has committed to:
- Set out a strategic longer-term plan for the payments system, developed with industry and reviewed annually.
- Settled the details of additional powers for the treasurer to set payment system policy.
- Determined the changes necessary to modernise payments system legislation to accommodate new and emerging payment systems, including consideration of buy now, pay later (BNPL) and digital wallets.
With the same deadline, in relation to crypto-assets, the government will have:
- Completed a consultation on the establishment of a licensing framework for digital currency exchanges to provide greater confidence in the trading of crypto-assets.
- Finalised its consultation on a custody or depository regime for businesses that hold crypto-assets on behalf of consumers so that investors have greater confidence in the safekeeping of these assets.
- Received advice from the Council of Financial Regulators, working with other relevant agencies, on the underlying causes and policy responses to the complex issue of de-banking (known in Europe as de-risking).
Rapid digitisation
As with other countries, the use of non-cash payments has exploded in Australia, with COVID-19 having rapidly pushed people’s lives online.
In addition, around 55m non-cash payments are made in Australia every day, according to government data, and almost half of the population use their phones to make payments. In fact, Australia has one of the largest non-cash markets globally on a per capita basis according to VIXIO research.
Meanwhile, the number of Australians transacting in cryptocurrency has surged 63 percent this year compared with 2020.
“Nowhere is this digital disruption playing out faster than in the payments and crypto-asset sectors,” said Frydenberg, who is deputy leader of Australia’s centre-right Liberal Party.
The minister confirmed that planned changes will begin to be consulted on in early 2022.
“The comprehensive payments and crypto reforms I am announcing today will firmly place Australia among a handful of lead countries in the world,” he said, adding that the reforms will transform the country’s regulatory framework as it currently applies to payments and crypto-assets.
According to Frydenberg, the approach being pursued by the government is influenced by payments reforms in the UK, Canada and Singapore.
The Farrell Payments System Review, which was published in August 2021, and the Senate Select Committee on Australia as a Technology and Financial Centre and Parliamentary Joint Committee Inquiry into Mobile Payments and Digital Wallets will also inform the direction that the government is taking.
Among other things, the parliamentary inquiry has looked into how bigtech platforms have affected payments in Australia, with one senior financial industry official having called for competition reforms to reduce Apple’s gatekeeper effect on payments.
Frydenberg, a parliamentarian from Melbourne, also used the speech to announce Australia’s foray into the central bank digital currency (CBDC) race, confirming that the government will commence consultation on the feasibility of a retail CBDC in Australia, with advice to be provided by the end of 2022.
“With several central banks around the world now developing their own digital currencies, we cannot allow ourselves to be disenfranchised in this new digital payments era,” he said.
Australia has remained relatively quiet on the matter of issuing a CBDC, with its neighbour, New Zealand, having announced that it is exploring the possibility of a CBDC in September.
“Australia must retain its sovereignty over the payment system,” he summarised.
