Author: Michael Bacina
The latest legal, regulatory and project updates in Blockchain and Digital Law brought to you by Michael Bacina and Luke Misthos of the Piper Alderman Blockchain Group.
Reserve Bank of Australia hiring for Central Bank Digital Currency
The Reserve Bank of Australia recently posted a job advertisement for a Central Bank Digital Currency team.
This exciting development comes hot on the heels of the RBA's submission to the Bragg Inquiry, citing 4 year old research, that "the case for issuing a CBDC for use by households has not been established".
However the RBA has been more upbeat on a CBDC for wholesale market participants to take advantage of:
- Speed, cost and robustness of payments;
- Atomic transactions; and
- Programmable money.
The RBA has also conducted several projects to test out distributed ledger technology for wholesale market participants, involving major players such as the Commonwealth Bank, National Australia Bank and Perpetual in those tests.
The new job advertisement states:-
We are researching whether there is a case for a CBDC in Australia, and if so, how it might be designed and what benefits and other implications it would have. This work is contributing to one of the RBA’s strategic focus areas on supporting the evolution of payments in Australia.
A cross-disciplinary team will be established to conduct this research, with a view to:
- Designing research projects aimed at improving the RBA's understanding of the case for and implications of a CBDC; and
- Considering different technical solutions for an Australian CBDC
Given the supplementary submission made by the RBA to the Bragg Inquiry this would seem to include both retail and wholesale CBDC opportunities. This exciting employment opportunity is now taking applications, and since there are a wealth of projects around the world already ahead of Australia in the CBDC race, there will be plenty of material and real world data to research as Australia moves closer to a wholesale or retail CBDC.
AFR: Australian regulators yet to understand digital assets
The Australian Financial Review (AFR) has reported shortcomings in the understanding of digital assets in Australia by regulators, specifically the Australians Securities and Investment Commission (ASIC).
A range of inconsistencies in the digital asset space was highlighted in a recent Chanticeer column, including ASIC taking near no steps to stop scammers using social media platforms to lure Australia into scams using famous individuals images and claims of returns from financial product trading platforms, and the Australian Stock Exchange not permitting Bitcoin exchange-traded products while Afterpay's new possible owner Square Inc, which made the majority of its profit in the first six months of this year from Bitcoin, prepares to list.
Despite many international jurisdictions, like Canada and Europe, allowing exchange traded products which treat digital currencies like property or commodities, the AFR accuses Australian regulators of awaiting guidance from the United States, who have had their own tumultuous year with digital regulation.
One unnamed ASIC official was called out for not understanding how Bitcoin works in a recent online meeting, suggesting that because of the way Bitcoin's code *could* change, it should be considered a "standalone asset". This repeats ASIC's suggestions in CP343, a consultation which sets out ASIC's view that crypto-assets can't fit within existing asset classes because there is no certainty of pricing, like indexes (except that S&P offers indexes), because there is challenging to custody of such assets (except there are regulated custody providers already in the space), and the last argument which seems to be remaining, is that the code could possibly change.
By virtue of the publicly available source code and long published documentation, it is well known the only way to change the code of the Bitcoin protocol is to have control of over 50 per cent of miners running the network, a feat that would require control of more electricity than is needed to power Australia and would be immediately and easily apparent to all given the code of Bitcoin's protocol is open source and can be inspected at any time.
This notion, that a possible change in an assets use or "class" falls apart if the logic is applied to other common exchange traded products. Real-estate investment trusts and gold exchange traded products hold assets which can change in use or "class", for example if a property changes use or a gold bar is converted into a gold watch.
Regulators need a clear understanding of the things which they seek to regulate, lest a well intentioned desire to protect consumers simply stifle innovation and drive potential purchasers offshore where they will have even less protection from unscrupulous operators.
While the digital asset space continues to grow, it is paramount Australian regulators properly understanding its nature in order to benefit and support the digital economy. We hope the ongoing Bragg Inquiry recommends all Australian regulators receive specific funding to help boost their knowledge understanding of this growing technology so they can better apply their regulatory tookit to the real opportunities and risks in the space.
BTC Markets Electrifies Banking with Volt
The Australian Financial Review has reported (paywall) that one of Australia's oldest digital currency exchanges, BTC Markets, has partnered with neobank Volt Bank, to offer banking services to crypto investors.
Debanking of digital currency exchanges has been a sufficiently serious problem to gain the attention of the ongoing Senate Inquiry into Australia as a Technology and Financial Centre, Chaired by Senator Bragg. The link up with Volt is quite interesting given it implies that BTC Market's days of being debanked are over.
Steve Weston, CEO of Volt Bank, said:
The crypto community hasn’t been happy with the games being played by banks and making life more difficult
Caroline Bowler, CEO of BTC Markets, politely said:
Our experience probably mirrors a lot that’s already in the public domain about dealing with financial institutions in Australia... [w]e’ve certainly had a lot of changing relationships with financial institutions
The deal reportedly took 18 months to reach a point where APRA, the Australian Prudential Regulation Authority which has responsibility for regulating banks, was satisfied with arrangements.
The blockchain and crypto community will be marking this announcement and the arrival of the intersection of traditional banking and digital assets, with great interest, as fiat currency on and off ramps have long been considered one of the limiting factors for more entrants into the digital asset ecosystem. Traditional banks will now face pressure to reconsider their position towards digital currency exchanges from a new angle, competition and ultimately their own investors wondering why these banks aren't seeking to play a part in the rapidly growing blockchain space.
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