Our latest #Bitesize roundup covers key recent FinTech, Payments, Open Banking related regulatory developments in Australia.
FinTech and payments
Budget confirms that Bitcoin will be taxed as an asset
On 25 October 2022, the Federal Government confirmed its intention to introduce legislation to clarify that digital currencies such as Bitcoin will continue to be excluded from the Australian income tax treatment of foreign currency. As such, capital gains tax will still be payable when exchanging or trading digital currencies. This measure was introduced to remove uncertainty following the decision by the government of El Salvador to adopt Bitcoin as legal tender.
Budget Paper No. 2 makes it clear that this exclusion does not include digital currencies issued by, or under the authority of, a public body, such as central bank digital currencies.
Budget Paper No. 2 is available here.
RBA system breach affects settlement services
On 12 October 2022, the RBA announced that it had experienced a system failure during a planned software change, affecting Fast Settlement Services and Low Value Clearing and Settlement Services for just over five hours.
Settlement notifications that were normally sent to participants in the new payment platform immediately after settlement of these transactions were also delayed or not sent, leading to a backlog of payments.
The RBA’s deputy governor, Michelle Bullock, apologized to industry participants and customers for the inconvenience caused: “[i]It was disappointing that this happened and we recognize the impact this would have on people who rely on the payment system. I want to assure people that the bank takes the stability of its payment infrastructure very seriously and will redouble its efforts to ensure that this does not happen again.“
The media release is available here.
IOSCO provides regulatory recommendations to address risks from digitization of retail marketing and distribution
On 12 October 2022, the board of the International Organization of Securities Commissions, of which ASIC is a member, published its final report on retail distribution and digitalisation. The measures outlined in the report aim to help IOSCO members adapt regulatory and enforcement activities to address the risks associated with the rapid uptake and development of online retail distribution, including the growing presence of financial influencers (“fine influencers”) and use of gamification techniques. Key recommendations in the report include:
- greater cross-border cooperation in investigations and enforcement activities to deal with regulatory and supervisory arbitration, such as immediate exchange of information between IOSCO members conducting investigations and freezing assets on behalf of other IOSCO members to prevent the disappearance of investor funds; and
- where a business has clients in jurisdictions outside its home jurisdiction, the home regulator should require the firm to carry out due diligence to ensure it meets the local licensing requirements of those foreign jurisdictions and require the business to keep records of that due diligence.
The media release is available here.
The report is available here.
Open banking and consumer data rights
Treasury publishes sectoral assessment report recommending technical changes to bank designation instrument
On 1 November 2022, the Ministry of Finance issued a final sector assessment report recommending that the bank designation instrument be changed to explicitly include goods and services provided in connection with the rental or hire of goods (lease agreements), including hire purchase arrangements.
This proposed technical change arose out of uncertainty as to whether the definition of “product” in the Bank Designation Instrument covers all lease products offered by banks. Pursuant to Part IVD of Competition and Consumer Act 2010 (Cth), the Ministry of Finance must prepare a sectoral assessment report before the minister creates a designation instrument for a sector.
Treasury notes that the revised definition of “product” is consistent with that recommended in the final sector assessment report for non-bank lending.
The final sector assessment report is available here.
The ABA cautions caution in proceeding with initiating action
On 24 October 2022, the Australian Banking Association (ABA) raised concerns about moving ahead quickly with the expansion of the CDR regime in light of recent cyber security incidents. The ABA addressed these concerns in its response to the Treasury Department’s consultation on the exposure legislation to enable action initiation under the CDR regime. In particular, the ABA recommended that:
- the draft legislation is clarified to ensure that measures service providers (ASPs) can refuse to act on a requested action where it does not meet the ASP’s fraud, fraud or cyber risk appetite (eg being able to impose transaction limits on payment instructions);
- a full strategic assessment and cost-benefit analysis to be comfortable that the cost of building for a type of action is not outweighed by the consumer benefit, taking into account fraud, fraud and cyber risk (among others); and
- to allow a period of at least 18-24 months before declaring actions for implementation, to allow the CDR regime as it stands to mature.
The ABA’s submission to Treasury is available here.
