Managing Director of Blockchain APAC, and tech advisor for Skafold Global, Steve Vallas, says the 2023 token mapping may have given the regulatory perimeter shape by helping to legally define digital assets and whether they are financial products.
“As an example, the token mapping exercise could (have) provided guidance to exchanges and industry stakeholders about what factors and features either create or exclude the obligations applicable to financial products,” Vallas says.
“In effect facilitating a further opportunity to determine whether the legal classification is appropriate given the type of product, it’s risk and how it is likely to develop or be reconstituted.”
Global leader, digital transformation practice at Norton Rose Fulbright, Nick Abrahams, agrees with the government’s current priorities, arguing there are too many unregulated exchanges in Australia.
“Many of them are sub-scale. These exchanges pose a significant risk to Australians, especially those who store their crypto on the exchange. If the exchange is compromised either by fraud, hacking or a liquidity shortfall, many everyday Australians will lose their money.”
Abrahams says token mapping would have helped distinguish crypto investments from the more innocuous use of digital tokens, such as for marketing and loyalty programs by big brands.
“We need to move quickly to a situation where it is clear which tokens are unregulated and which are regulated. Not all tokens need to be regulated.”
This view was echoed by Stephen Jones in his speech outlining the government’s regulatory stance.
“We have taken into account the feedback from industry to our token mapping paper, which helped us refine and clarify where regulation must first be focused,” he said at the time.
“It’s not every token in every scenario that requires regulatory oversight. Instead, the anchor of our proposed regulation will be the entities that hold Australian’s digital tokens for them—the crypto exchanges and other digital assets platforms.”
Global authority in digital asset regulation and consultant with McDonell Nadeau, Loretta Joseph, said that in addition to “proper rules around custody”, the turmoil created by FTX’s collapse highlighted the urgent need for basic compliance clarity for the crypto industry.
“The (FTX collapse) has shown that things like reporting, governance, treasury management–whether it’s a crypto asset or whether it’s a security or fixed income assets—these things need to have the appropriate checks and balances put in place by these companies.”
Joseph participated in a discussion of global standards for virtual assets held at the 17th G20 in Bali: she said progress was being made on global alignment and that Australia didn’t need to reinvent the wheel.
“We are dealing with an industry that is global in nature. I think all jurisdictions should take note of the global standard-setters and work from those frameworks,” Joseph says.
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