Australian Financial Reform Imminent While Others Mull Enforcement Actions – Regulations Weekly

Australian Overhaul

With the majority of world governments actively considering the role which digital assets will play in the years to come, we have seen a stark difference in responses.  For each nation that attempts to ban them (i.e. China), there is another which appears comfortable with their increased presence.  One such nation is Australia.

In a recent interview on 7NEWS Australia, Treasurer Josh Frydenberg spoke on the subject.  When asked ‘What are you going to be doing to bring us in to the digital age?’  Frydenberg responded with the following.

“This is a very big deal.  There is a digital revolution occurring in our payments system. Gone are the days of cheques – cash is in decline – and now we’ve got ‘buy now pay later’, digital wallets, digital currencies that are fast becoming the new norm. 

Our regulatory system has not stayed up to date with those digital changes, indeed it hasn’t changed much in the last 25 years, even though every single day in Australia there is around 55 million cashless transactions worth about $650 billion and more than 800,000 Australians have owned a form of cryptocurrency and there are 5 million+ ‘buy now pay later’ accounts.

So what we’re doing is we’re modernizing the payments system.  We’re broadening out the definition of the services and the products that can be regulated.  We’re taking this area out of the shadows and bringing it in to a considered regulatory framework – which is world leading.”

It is quite clear from this discussion that there are big changes on the horizon for digital assets in Australia.  Thankfully from this recent commentary, it sounds as though any changes will be accepting towards the sector, and facilitate its growth rather than attempt to stymie it.

Potential Penalties

As indicated above, there remain select nations around the world that continue to view digital assets as a threat.  The most recent high-profile example of this is the worlds second largest nation by populace – India.  While nothing official has been implemented to date, FUD has been circulating as of late due to pending legislation.

Highlighting the Indian governments stern stance towards the sector are the potential punishments associated with breaches in policy.  Originally shared by Bloomberg|Quint, insiders with knowledge on the pending policy change indicated that fines could be doled out up to $2.7 million USD, with prison time reaching up to 1.5 years.

As noted, this is not yet the case.  For multiple years now, news coming out of India has swayed from potential harsh crackdowns to mainstream acceptance.  For the time being, this is simply a potential scenario of which to be aware of, and consider.

Guidance First, Punishment Second

On various occasions over the past few years, the SEC has been criticized from both within and outside the organization for its propensity to ‘regulate through enforcement'.  A similar criticism has now been issued against the CFTC, stemming from its recent treatment of digital asset exchange, Kraken.

In an interview with Financial Times, Commissioner Dawn Stump of the CFTC voiced her displeasure with the decision to regulate through enforcement stating, “What I discourage here at the CFTC is bringing enforcement actions without giving [companies] the tools they need to be compliant.”

When high ranking individuals from multiple regulators each speak out against the practice, validity is given to the argument of many industry participants that current policies are simply inadequate and unclear, as most stem from a time before digital assets were even conceived.