Our latest #Bitesize round-up covers key recent FinTech, payments, Open Banking-related regulatory developments in Australia.
FinTech and Payments
Budget confirms Bitcoin to 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 remain payable on the exchange or trade of 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 make clear that this exclusion does not capture digital currencies issued by, or under the authority of, a government agency, such as central bank digital currencies.
Budget Paper No. 2 is available here.
RBA system outage impacts settlement services
On 12 October 2022, the RBA announced that it had experienced a system error during a planned software change, impacting Fast Settlement Services and Low Value Clearing and Settlement Services for just over five hours.
Settlement notifications usually sent to participants in the New Payments Platform immediately following settlement of those transactions were also delayed or not sent, leading to a backlog of payments.
RBA Deputy Governor, Michelle Bullock, apologised to industry participants and customers for the inconvenience caused: “[i]t was disappointing that this occurred and we recognise the impact this would have on people relying on the payments system. I want to assure people that the Bank takes the stability of the payments infrastructure very seriously and will double its effort to ensure this does not happen again.”
The media release is available here.
IOSCO issues regulatory recommendations to address risks from digitalisation 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 assist IOSCO members in adapting regulatory and enforcement activities to meet the risks associated with the rapid uptake and development of retail distribution online, including the growing presence of financial influencers (“finfluencers”) and the use of gamification techniques. Key recommendations in the report include:
- greater cross-border cooperation in investigations and enforcement activities to address regulatory and supervisory arbitrage, such as the prompt exchange of information between IOSCO members conducting investigations and freezing assets on behalf of other IOSCO members to prevent the dissipation of investor funds; and
- where a business has clients in jurisdictions outside of their home jurisdiction, the home regulator should require the firm to undertake due diligence to ensure they meet the local licensing requirements of those overseas jurisdictions and require that the business retain records of that due diligence.
The media release is available here.
The report is available here.
Open Banking and Consumer Data Right
Treasury releases sectoral assessment report recommending technical amendments to banking designation instrument
On 1 November 2022, Treasury released a Final Sectoral Assessment Report recommending that the banking designation instrument is amended to explicitly include goods and services that are supplied in connection with the letting or hire of goods (leases), including on-hire purchase arrangements.
This proposed technical amendment arose from uncertainty as to whether the definition of ‘product’ in the banking designation instrument covers all lease products offered by banks. Pursuant to Part IVD of the Competition and Consumer Act 2010 (Cth), Treasury must prepare a sectoral assessment report before the Minister makes a designation instrument for a sector.
Treasury notes that the revised definition of ‘product’ is consistent with that recommended in the Final Sectoral Assessment Report for non-bank lending.
The Final Sectoral Assessment Report is available here.
ABA warns caution on proceeding with action initiation
On 24 October 2022, the Australian Banking Association (ABA) raised concerns with proceeding swiftly with the expansion of the CDR regime in light of recent cyber security incidents. The ABA raised these concerns in its response to Treasury’s consultation on the exposure draft legislation to enable action initiation under the CDR regime. In particular, the ABA recommended that:
- the draft legislation is clarified to ensure that action service providers (ASPs) can refuse to act on a requested action where it does not meet the ASP's scam, fraud or cyber risk appetite (e.g. being able to introduce transaction limits on payment instructions);
- a full strategic assessment and cost-benefit analysis to be comfortable that the costs of building for an action type are not outweighed by the consumer benefit, taking into account the scams, frauds and cyber risks (amongst other things); and
- allowing a period of at least 18-24 months ahead of declaring actions for implementation, to allow the CDR regime as it stands to mature.
ABA’s submission to Treasury is available here.
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Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.