Albanian government launches crypto token mapping exercise
Australia’s government has announced it will prioritize “token mapping” as part of its crypto asset review. Treasurer Jim Chalmers and Assistant Minister for Competition, Charities and Finance Andrew Leigh claimed that “regulation is struggling to keep up with and adapt to the crypto-asset sector.”
The government believes that no other country has carried out a symbolic mapping exercise. It will focus on better understanding how Australians use crypto-assets and the gaps in current regulations. A core theme of the government’s statement is consumer protection and the need to “provide additional consumer protection.”
Token mapping was a core recommendation of an October 2021 review by a parliamentary select committee of Australia as a technology and financial centre. The committee’s rationale focused heavily on the rise of Decentralized Finance (DeFi) and in particular the growth of DeFi protocols and blockchain projects using Decentralized Autonomous Organization (DAO) models. DAOs have governance models that allow stakeholders to vote, making decisions collectively rather than through a centralized entity or designated individual. For example, some DAOs are used to launch crypto-backed stablecoins.
A “serious approach” to crypto regulation
The Morrison government, which left office in May 2022, had announced a consultation on a proposed Digital Services Act. Built around four pillars that included technology neutrality, flexible principles, direct ministerial oversight and cooperation, the plan included a framework for DAOs. However, the Albanian government will put these plans on hold while it carries out the token mapping work: “The previous government was engaged in the regulation of crypto-assets, but jumped prematurely right to alternatives without first understanding what was being regulated.”
Nonetheless, Australia’s policymakers recognize the potential benefits of acting quickly. The parliamentary committee noted that examples of DAO legal structures globally are “limited”, highlighting that the US state of Wyoming legislated in this area and has attracted “significant business activity” as a result of its “proactive attitude”.
The race to establish frameworks and administer arbitration
Regulators in other major regional economies are still grappling with regulatory arbitrage related to the crypto-asset space. In July 2022, South Korean regulators intervened to tackle so-called “kimchi premium dealers”. These dealers buy tokens, including bitcoin, overseas before selling them at a profit through domestic crypto exchanges. In August, the country’s Financial Intelligence Unit (FIU) took action against 16 foreign-based firms that it believes have been operating without the necessary authorizations under the Financial Transaction Reporting Act.
Meanwhile, Hong Kong is preparing to launch its virtual asset services (VASP) licensing regime, which the government believes will be one of the most comprehensive in the world. License applications for covered firms must be submitted by 1 December 2023.
Next step
The announcement by the Australian government represents the first step in a likely year-long process towards legislation to deliver a comprehensive set of regulations. In the meantime, firms should stay abreast of the latest announcements and especially watch out for the public consultation document on token mapping. The government has promised to issue this “soon”.
Originally published August 26, 2022, updated August 26, 2022
