The Australian financial system prudential regulator is drafting digital asset guidelines for the industry that will likely influence policy and practice this side of the Tasman.
In a speech to the American Chamber of Commerce last week, Australian Prudential Regulation Authority (APRA) chair, Wayne Byres, flagged the release of new guidance for the financial industry to give “more clarity on regulatory expectations” around crypto-currencies and other emerging digital products.
“Following a similar path to our UK equivalent, we are in the process of finalising a letter to regulated firms on how we expect them to manage their dealings with digital assets, including stablecoins and crypto-assets,” Byres told the Australian branch of the American Chamber of Commerce. “The letter will not introduce new regulatory requirements. Much like our approach to climate risk, its underlying message is primarily one of: ‘by all means innovate, but proceed with care and in full knowledge of the risks’.”
APRA has a wide regulatory ambit including superannuation funds, insurers and banks – the latter two groups typically operate in both Australia and NZ.
Byres told the Australian industry gathering that APRA would take a balanced approach to regulating the fast-evolving digital financial universe based on three tenets: technology neutrality; principles-based; and, a whole-of-system perspective.
“Regulation of the financial system exists because history has taught us that, left to its own devices, the system is prone to bouts of instability and considerable harm to society. But equally we know a dynamic and innovative financial system – with participants able to take risk and innovate to deliver better products, services, and ways of doing business – generates important and long-lasting economic benefits for society,” he said. “Finding that Goldilocks point for regulation – not too much, not too little – so as to allow the digitisation of finance to generate maximum economic benefit, but doing so within society’s risk tolerance, is what we strive for.”
Governments and regulators would have a strong influence on where the digitisation of finance settles, Byres said, but ultimately consumer choices hold sway.
“We are first and foremost a safety regulator, with a mandate from the Australian Parliament to promote stability. That does not, however, translate to limiting change with a view to preserving the status quo. Nor does it mean protecting incumbent financial institutions, when better, safer and more efficient ways of doing business emerge,” he said.
“If technology can deliver a financial system that is indeed better, safer and more efficient, our task is to embrace the changes for the benefit of the Australian community.”
The NZ parliamentary Finance and Expenditure Committee launched an enquiry “into the current and future nature, impact, and risks of cryptocurrencies” last June but has yet to report back after receiving almost 280 submissions on the matter.