Australia introduced a classification for crypto assets
Entering a global regulatory race, Australia is opening a public consultation on its own taxonomy of crypto assets. The national regulator proposes to distinguish four main types of products related to the crypto industry.
On 3 February, the Australian Department of Finance released consulting paper on “Token Mapping,” announcing it as a foundational step in the Government’s multi-stage reform agenda to regulate markets. It seeks to inform a “fact-based, consumer-aware and innovation-friendly” approach to policy development.
Based on a “functional” and technology-neutral method, this paper proposes some basic definitions for all things crypto.
At the first level, it outlines the key concepts of crypto networks, crypto tokens and smart contracts. According to the vision of the Ministry of Finance, a crypto network is a distributed computer system capable of hosting crypto tokens. Its main function is to store information and process user instructions. The paper cites Bitcoin and Ethereum as the two most well-known public crypto networks.
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A crypto token is defined as a unit of digital information that can be “exclusively used or controlled” by a person who does not manage the host hardware on which the token is recorded. According to the paper, the concept of “exclusive use and control” is the main differentiating factor between crypto tokens and other digital notes.
Smart contracts apply when computer code is published to the crypto network database. It involves intermediaries or agents performing functions based on appointments or arrangements or other procedures completed by crypto networks without appointments, intermediaries and agents.
Starting from this simple definition, this paper proposes a taxonomy of four types of crypto-related products:
Crypto asset services, which include lending and borrowing, fiat on/off stream, crypto token trading, funds management, mining/betting as a service, gambling and depository. Intermediary crypto assets, which are closest to the definition of a widespread token; rights or licenses in connection with access to or subscription to events, intellectual property, gift programs, consumer goods and services, fiat money, non-financial assets, and coupons of government bonds. This class includes stablecoins. Network token — a “new type of currency” that is a peer-to-peer payment infrastructure. Think of your real Bitcoin (BTC). Smart contracts exist on a spectrum from “intermediary” to “public.” Intermediaries use the former in providing services; the latter is used by the parties to eliminate the need for intermediaries.
While this paper proposes to initiate discussion of this taxonomy and does not provide any legislative initiatives, its authors anticipate a relatively easy adjustment of existing legislation for most of the crypto ecosystem. These are pockets of ecosystem where functions are guaranteed by the public, self-serve software, which could demand the creation of a new legislative framework.
The Treasury will be waiting for feedback until March 3. The next big step of national regulatory discussions will come with the release of a similar paper on a possible licensing and custody framework for crypto in mid-2023.
On February 1, the Treasury of the United Kingdom also published its consulting paper on crypto regulation. In it, the financial authority emphasized the lack of need for separate legislation, given the capacity of the existing Financial Services and Markets Act to cover digital assets.