On February 3, 2023, the Australian government published a consultation paper, exploring those elements of the cryptocurrency ecosystem which require additional regulation. This paper follows a joint statement issued in August 2022 by Treasurer Jim Chalmers and Assistant Minister for Competition, Charities, and Treasury Andrew Leigh that announced crypto reforms were underway.
In the paper, the Australian Treasury explains that everyone who invests in cryptocurrency must include their assets in their tax returns. The paper also offers the starting blocks for a “token mapping framework” that can help explain how various cryptoassets – from stablecoins to NFT’s to the original ‘tokens’ – might fit into existing regulatory frameworks.
The consultation period for this paper is open until March 3, 2023. The full list of consultation questions can be found in Annexure 4 on pages 52 and 53.
The authors also discuss the concept of a “functional perimeter,” which would set Australia apart from other jurisdictions by adopting a broad “functional” definition of a financial product. This approach follows the policy adopted after the Wallis Inquiry recommended that the law adopt a broad definition of “financial product” so that “functionally-equivalent” products can be treated equivalently.
According to the paper, other jurisdictions have created an exhaustive list of regulated products and are often guided by risk-based approaches when updating the list to include novel financial products. The Hong Kong Securities and Futures Commission (SFC), for example, announced in January that it will propose a subset of tokens permitted for retail investors’ trading. According to the CEO of the SFC Julia Leung, only “highly liquid” assets will be on the list.