Executive Summary


Following the release of the Senate Select Committee on Financial Technology and Regulatory Technology's first two interim reports, in September 2020 and April 2021, the committee has now undertaken a final phase of work as the Select Committee on Australia as a Technology and Financial Centre.
The committee has already made a range of recommendations in a variety of areas across its first two interim reports. The committee decided that for this phase of the inquiry, it would focus on several issues that had been identified to the committee as key areas affecting the competitiveness of Australia's technology, finance and digital asset industries, namely: the regulation of cryptocurrencies and digital assets; issues relating to ‘de-banking’ of Australian FinTechs and other companies; the policy environment for neobanks in Australia; and options to replace the Offshore Banking Unit.

Cryptocurrency and digital assets

The scale and speed with which cryptocurrencies and other digital assets have progressed in recent years has surprised governments, regulators and policy makers. With a global market now totalling in the trillions of dollars, the tremendous potential of blockchain technology and decentralised finance is becoming recognised by mainstream institutions and investors. Recent survey data shows that 25 per cent of Australians either currently or have previously held cryptocurrencies, making Australia one of the biggest adopters of cryptocurrencies on a per capita basis.
While other jurisdictions have moved forward in attempting to create regulatory frameworks that give market participants certainty and provide consumer protections, Australia has not yet introduced fit-for-purpose regulatory systems for these emerging technology sectors. This is creating uncertainty for project developers, businesses, investors and consumers. Two prominent Australian-founded digital currency exchanges (DCEs) have recently gained regulatory licenses in Singapore and the UK respectively, showing what Australia is missing out on by not developing an appropriate framework here.
Chapter 2 of this report outlines the current regulation of this sector in Australia and overseas, while Chapter 3 sets forth the many proposals put forward by submitters and witnesses on how digital assets could be properly regulated in Australia in order to promote innovation and attract investment while providing appropriate safeguards for investors and consumers.
The committee has put forward a series of eight recommendations to address these issues.
Firstly, it is clear that the current regulation of DCEs, which is generally limited only to registration with AUSTRAC, is inadequate for businesses that in some cases are dealing with asset volumes in the billions of dollars. A properly designed Market Licence for this sector will assist the sector to mature and create confidence.
Secondly, an appropriate regime for custodial and depository services for digital assets is required. Custody arrangements for digital assets present some unique risks that are not analogous to traditional assets, which must be carefully thought through in the development of appropriate requirements. Given the scale of Australia's existing industry for custody of traditional assets, there is significant scope for Australia to benefit from becoming a leader in the digital assets space.
Thirdly, a token mapping exercise is required to classify the various types of crypto-asset tokens and other digital assets being developed in the market, to ensure that the regulatory classifications for these assets are fit-for-purpose. This exercise should take account of the various approaches to classifying digital assets that have occurred in other jurisdictions in recent years.
A new Decentralised Autonomous Organisation legal structure is needed to ensure that emerging types of blockchain-based organisations can be established with clarity as to how they can operate in Australia. This approach has already been trialled in other jurisdictions, and in practical effect will operate similar to a limited liability company.
A review of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations is required to ensure that these regulations are fit-for-purpose and do not undermine innovation. In particular, issues around the implementation of the Financial Action Task Force 'travel rule' have been raised with the committee as requiring attention.
Taxation rules for digital assets require further clarification. In particular, the rules around Capital Gains Tax (CGT) for cryptocurrency and digital assets need to be updated to ensure that new types of technology structures are appropriately accounted for, and digital asset transactions only create a CGT event when they genuinely result in a clearly definable capital gain or loss.
The opportunities associated with digital asset infrastructure were highlighted in evidence to the committee, as well as the energy intensity of cryptocurrency 'mining' practices. The committee is recommending a tax concession for digital asset miners operating in Australia who source their own renewable energy.
Finally, the committee heard about both the opportunities and risks associated with Central Bank Digital Currencies (CBDCs). The committee considers that Treasury should conduct a policy review on the potential for a retail CBDC in Australia, to ensure these issues are continuing to be appropriately explored in the Australian context.


The issue of de-banking is discussed in Chapter 4 of this report. The committee heard extremely concerning accounts from individuals and businesses that have experienced de-banking in Australia, particularly in the remittance, payments and the digital assets sectors.
The committee recognises that de-banking is a complex problem occurring for a number of reasons, including underdeveloped regulatory arrangements (particularly in the digital asset space), and the severe penalties associated with banks breaching their AML/CTF obligations. It is also clear that banks are often de-banking clients in these sectors without adequate consideration and without clear reasons. In addition, anticompetitive reasons for de-banking were also suggested to the committee. More must be done to ensure that the guidelines around de-banking are clear and there are avenues of recourse for those who have been treated unfairly.
Work by the ACCC in 2019 recommended that the government establish a working group to consult on the development of a scheme through which the due diligence requirements of the banks can be addressed. The Council of Financial Regulators has now established this working group. The committee has recommended that this work to establish a due diligence scheme should be finalised and implemented by June 2022.
The committee is also recommending that, order to increase certainty and transparency around de-banking, the Australian Government should develop a clear process for businesses that have been de-banked. This scheme should involve businesses that have been de-banked being able to have recourse to a complaints process through the Australian Financial Complaints Authority, to ensure that procedural fairness and natural justice are afforded.
The committee also heard that providing more direct access for businesses to payments rails, rather than having to rely on the major banks, can help address issues around de-banking. Noting that the recent Farrell payments review recommended that the RBA should develop common access requirements for payments systems, the committee has recommended that the RBA should develop common access requirements for the New Payments Platform in order to reduce the reliance of payments businesses on the major banks for the provision of banking services.

Other issues

The committee also considers several other issues in Chapter 5 of the report, before setting out its full conclusions in Chapter 6. In particular, the committee has considered evidence on options to replace the Offshore Banking Unit, and is recommending that the Global Markets Incentive suggested by submitters should be implemented to replace the Offshore Banking Unit regime by the end of 2022.


Australia has significant potential to keep advancing as a technology and financial centre, if we grasp the opportunity to update our regulatory frameworks, drive innovation and enhance our competitiveness. The committee commends this report and the recommendations in it to government, and industry, to drive this agenda forward.

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