Digital Payments, Cryptocurrency Regulation Flagged by Treasurer Josh Frydenberg

First published in ABC News on 8 December 2021


Consumers who make purchases on their mobile phones, use buy now, pay later platforms, and invest in cryptocurrency could be better protected under a federal government plan to overhaul Australia’s payments system and regulate financial technology organisations.

Federal Treasurer Josh Frydenberg said the government planned to legislate “the largest reforms to our payments systems in a quarter of a century”.

Mr Frydenberg said the “comprehensive payments and crypto-asset reform plan” would “place Australia among a handful of lead countries globally”.

A particular focus of the reforms is to rein in buy now, pay later (BNPL) companies such as Afterpay and Zip Co, digital wallets such as Apple Pay and Google Pay, and cryptocurrency.

However, details on most of the reforms are not expected to be settled until various agencies consult and report back to the government at the end of 2022, which will be after the federal election.

The government also wants to legislate to give the treasurer and Reserve Bank of Australia more power to direct payment system policy and address emerging and future gaps in the payments regulatory systems framework.

“Without reform, Australian businesses and consumers could increasingly transact in environments that are largely unregulated from an Australian perspective, with any rules in play instead determined by foreign governments and large multinationals, including tech giants,” the treasurer said.

Digital wallets under the spotlight

Digital wallets allow consumers to make tap-and-go purchases and have grown in popularity during the COVID-19 pandemic.

About 55 million non-cash payments, worth about $650 billion, are made in Australia every day, according to Treasury. Almost half of Australians make payments using their mobile phone.

The big banks have been vocal about their dislike of big tech companies, such as Apple and Google, muscling in on their turf and denying them enough access to their platforms.

In July, CBA chief executive Matt Comyn told a parliamentary inquiry the restrictions Apple had on its phones were stopping banks and fintechs from setting up their own iPhone digital wallets.

Cryptocurrency protections for investors

On cryptocurrency, the government plans to investigate a custody regime that would protect consumers who trade on exchanges.

It comes as two cryptocurrency exchanges have collapsed in recent months, with some customers facing the possibility of losing all their crypto investments.

The Board of Taxation will also be asked to look into how best to tax these digital assets.

As global leader of digital transformation practice at Norton Rose Fulbright, Nick Abrahams said the government had been missing out on tax revenue by not regulating the crypto space.

He said 17 per cent Australians own crypto, “with another 13 per cent saying they will buy it in the next year”.

“The growth is massive,” he said.

“For the government, this regulatory response is as much about preserving the tax base as it is about consumer protection.”

Damien Johnson lost $2,500 in the collapse of cryptocurrency trading platform myCryptoWallet – which appointed liquidators on Friday – and said consumer protections were needed.

“I wanted to withdraw the holdings and couldn’t, and it wouldn’t allow me to sell the crypto either,” he said.

“At a consumer level, I definitely want there to be some sort of protection so we don’t lose our money trading crypto.”

‘Square reforms’?

Mr Abrahams said major reforms were also needed to deal with the increasing convergence of tech, payments, banking and cryptocurrencies.

“The government can no longer sit on the sidelines and the Square/Afterpay deal was a catalyst,” he argued, “[with] Square, a big player in crypto, acquiring Afterpay, a world leader in BNPL, to create one of the largest companies on the ASX, with very little regulation.

“Maybe we call these the “Square reforms.”

The chief executive of the Consumer Action Law Centre, Gerard Brody, welcomed the the Treasurer’s foreshadowed consultation on BNPL in 2022.

“This is an opportunity to ensure BNPL is regulated effectively, and consistently, with other credit products, to address the significant risk of debt and financial stress associated with these products,” he said.

The government will also ask the Council of Financial Regulators to look at de-banking — which is when certain businesses or account holders are denied banking and other financial services.

Plans to overhaul Australia’s outdated payment system are in response to the 41 recommendations of three recent reviews on the topic, which also examined how to regulate cryptocurrency.

Advice sought on digital currency 

The government will also consult on the introduction of a central bank digital currency (CBDC).

In a report on Wednesday, Reserve Bank of Australia Assistant Governor Michele Bullock said a “CDBC and asset tokenisation could deliver efficiency gains and improve risk management in wholesale financial market transactions.”

However, Ms Bullock said legal, policy and technological issues still needed to be explored.

Shadow Treasurer Jim Chalmers said Labor supported, in principle, measures that would protect consumers, ease pressures for small business, make the rules and regulations clear and support investment and innovation.

“Nothing Josh Frydenberg says today will happen before the election,” he said.

“This is just a commitment to consult on the Government’s last consultation.”

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