Cryptocurrency use is on the rise and the lack of regulation in the sector could threaten Australia’s national security, according to Liberal Senator and crypto advocate Andrew Bragg.
Senator Bragg will introduce a private member’s bill in the next session of Parliament, including new rules governing crypto exchanges and Chinese banks dealing with e-yuan in Australia.
“The Chinese government is piloting what they call the digital yuan, which is a form of digital currency, and they are currently testing it outside of China as well, with the United Arab Emirates. [United Arab Emirates]Hong Kong and Thailand,” he told RN Breakfast host Patricia Karvelas on Monday.
“This currency, if it became widespread in the Pacific, or even in Australia, would give the Chinese state enormous power, economic and strategic power that it does not have today.
“So I think we need to be prepared for that. We need to know more about this digital currency, so the bill sets out reporting requirements in that regard.”
China far ahead of Australia on digital currencies
China was the first major economy to explore the use of digital currencies in 2014 and is far ahead of its global peers.
It has conducted limited trials of e-yuan over the past three years.
However, China has yet to roll out the digital currency to its population of 1.4 billion, which is seen by critics as a way to tighten state control over the payments system.
In September last year, the Chinese government imposed a blanket ban on all cryptocurrency trading.
Unlike bitcoin, ether, and other cryptocurrencies (which are “decentralized,” or not controlled by the government), e-yuan falls under the People’s Bank of China.
Australia, meanwhile, is nowhere near as close to launching its own digital dollar.
Reserve Bank Governor Philip Lowe has long been skeptical of the idea of a digital currency, saying Australia already has a fast and efficient electronic payment system.
But last month, the RBA announced it was undertaking research into digital currencies as part of a limited “closed” pilot program – to see how they might actually be used by consumers and businesses in Australia.
Stricter rules for “stablecoins”
There is currently very little regulation in the Australian cryptocurrency industry.
A crypto exchange is only required to follow the general provisions of Companies Act and collect data about its customers (for financial crimes regulator AUSTRAC) when they open a trading account.
Last year, Bragg chaired a Senate committee that made 12 recommendations on how to improve cryptocurrency regulation.
They include a new market licensing regime for digital currency exchanges, changes to cryptocurrency tax rules to clarify when a capital gain or loss is realized, and the introduction of tax incentives for businesses. that use renewable energy for crypto mining (a process that leads to the creation of new digital coins).
But after the Coalition’s defeat in the federal election in May, Senator Bragg’s recommendations were not implemented by the new Labor government.
His private member’s bill goes further than his original recommendations by seeking to regulate “stablecoins” (a type of cryptocurrency typically pegged to a real-world asset, such as the US dollar), criminalizing the issuing one without a license.
“What we’ve seen over the last six months or so is the collapse of major stablecoins, including the US stablecoin Terra,” said Senator Bragg.
“The Governor of the Reserve Bank of Australia and Janet Yellen [the US Treasury Secretary] called for regulation, so that if someone wants to issue a stablecoin, they are required to hold reserve capital to meet any risk.”
In May, the value of Terra plummeted dramatically – to the point of becoming completely worthless.
Many investors were burned because this particular “stablecoin” was touted as a “safe” way to earn high returns (up to 19.6%) in a low interest rate environment.
However, Terra was not backed by real-world currency, but by its “sister coin” Luna, which also saw its value drop to zero.
‘Unnecessary harm’ to consumers
“It’s very important that we protect consumers from unnecessary harm,” the senator said.
Australian consumers lost $158 million to investment scams between January and May, according to data from the Australian Competition and Consumer Commission (ACCC).
This is a 314% increase from the same time last year, and the vast majority of these scams relate to cryptocurrency investments.
Given that the federal Liberal Party is in opposition, the chances of Senator Bragg’s private member’s bill passing are slim.
In August, Treasurer Jim Chalmers said the first step in Labor’s crypto agenda was to prioritize “token mapping” work this year.
Basically, the purpose of this exercise is to determine which crypto assets are already covered by the Financial Services Act – and which are “non-financial products” (which will require their own special legislation).