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Australia's Financial Services Minister insists many cryptos are financial products

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(Kitco News) - Stephen Jones, Australia’s Financial Services Minister, reinforced his earlier statements about regulating cryptocurrencies as financial products in an interview with the Sydney Morning Herald published Monday.

“I don’t want to pre-judge the outcomes of the consultation process we are about to embark on,” Jones said. “But I start from the position that if it looks like a duck, walks like a duck and sounds like a duck, then it should be treated like one.”

Jones noted that bitcoin appeared to be “attempting to replicate or replace traditional forms of currency” and acknowledged that this did not necessarily make it a financial product. “Other coins or other tokens are being essentially used as a store of value for investment and speculation,” he said, which means there’s a “good argument that they should be treated like a financial product.”

Jones said the government is focused on crypto assets that act like financial products but remain unregulated, and that the November collapse of cryptocurrency exchange FTX “puts beyond doubt” the need for crypto regulation in the country.

He added that he is not convinced of the need for special and separate regulations for these kinds of cryptocurrencies. “I’m not that attracted to setting up a completely separate regulatory regime for something that is, for all intents and purposes, a financial product,” he said.

The Australian Securities and Investments Commission (ASIC) and the Commonwealth Bank have gone further, supporting the drafting of legislation that would classify all crypto assets as financial products.

At the opposite end of the spectrum, Blockchain Australia, a lobby group for the country’s crypto sector, told the federal Treasury last year that it was strongly against this approach, arguing that this would harm investment and lead to job losses.

A report commissioned by the Tech Council of Australia on Nov. 30 claimed that the establishment of a proper regulatory framework around digital assets could add up to AUD$60 billion a year to the country's national GDP by 2030. The Digital assets in Australia report was written by consulting firm Accenture, and it outlined key objectives and opportunities for the regulation of digital assets.

"Australia has the opportunity to be a leader in responsible digital asset innovation and use,” the report said. “To do this, government and industry must work together to design a modernized regulatory framework, and a growth strategy for trusted digital assets recognizing the potential for this sector to drive innovation, investment and jobs.”

On Dec. 14, Jones announced that the government was going to make crypto regulation a priority in 2023. Along with the goal of establishing a crypto regulation framework, the government also plans to “update and strengthen Australia’s payment system; strengthen its financial market infrastructure; and establish a regulatory framework for Buy Now Pay Later,” the report said.

“These reforms are all about ensuring we have a financial system that works for consumers, businesses and investors – one that delivers for the Australian economy and the Australian people,” the statement from Jones said.

Jones said the previous government “sat on its hands” when it came to keeping pace with changes in the market, especially as it relates to new digital products and services, and this would be a key goal of Prime Minister Albanese’s government moving forward.

In August, Australia announced their intention to map the tokens available in the country to help identify how crypto assets and related services might be regulated. The process involves an investigation into the various characteristics of all digital assets used in Australia to classify them based on their asset type, underlying code, and other defining technological features.

The next step in the ongoing ‘token mapping’ work includes the release of a consultation paper in early 2023 that will outline which digital assets should be regulated by financial services laws and provide details on the development of appropriate custody and licensing settings to safeguard consumers.

In September, the country created a crypto-monitoring task force as part of its efforts to reign in the unregulated crypto sector, and a draft bill was introduced by Liberal Party Senator Andrew Bragg that is designed to clamp down on the use of digital asset exchanges, stablecoins, and China’s central bank digital currency, the e-Yuan.

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