Following the global regulatory race, Australia opened public consultation on its own taxonomy of crypto assets. National regulators propose to distinguish four main types of products related to the crypto industry.
On February 3, the Australian Treasury published a consultation paper on “Token Allocation”, announcing it as a critical step in the Government’s multi-stage reform agenda to regulate the market. It seeks to inform a “fact-based, consumer-aware, and innovation-friendly” approach to policy development.
Based on the “functional” and technologically neutral method, the document proposes several basic definitions for all things cryptographic.
At the first level, it describes the key concepts of crypto networks, crypto tokens, and smart contracts. In Treasury’s view, a crypto network is a distributed computing system capable of hosting crypto tokens. Its main function is to store information and process user instructions. The document cites Bitcoin and Ethereum as the two best-known public crypto networks.
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A cryptographic 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 where the token is registered. According to the document, the concept of “exclusive use and control” is a key distinguishing factor between cryptographic tokens and other digital records.
A smart contract works like computer code published in the database of a cryptographic network. These are intermediaries or agents that perform functions under promises or other arrangements or procedures that are completed by unpromised crypto networks, intermediaries and agents.
Building on these simple definitions, the paper proposes its taxonomy of four types of crypto-related products:
- Crypto asset services, including lending and lending, fiat phasing on/off, crypto token trading, fund management, mining/staking as a service, staking and custody.
- Intermediate crypto assets, which are closest to a generalized definition of tokens; rights or licenses in connection with access to events or subscriptions, intellectual property, rewards programs, consumer goods and services, fiat money, non-financial assets, and government bond coupons. This class includes stablecoins.
- Network tokens: a “new type of currency” that constitutes a peer-to-peer payment infrastructure. Think of your original Bitcoin (BTC).
- Smart contracts exist on a spectrum from “brokered” to “public.” Intermediaries use the former to provide a service; the latter is used by the parties to eliminate the need for an intermediary.
While the document proposes to start the discussion on this taxonomy and does not provide any legislative initiative, its authors anticipate a relatively easy adaptation of existing laws for a large part of the crypto ecosystem. They are the pockets of the ecosystem where functions are being ensured by public self-service software, which could require the creation of an entirely new legislative framework.
Treasury will wait for comment until March 3. The next major step of a national regulatory discussion will come with the publication of a similar document on the possible licensing and custody framework for crypto in mid-2023.
On February 1, Her Majesty’s Treasury of the United Kingdom also published its consultation document for crypto regulation. In it, the financial authority stressed the lack of need in separate legislation, given the ability of the existing Financial Services and Markets Law to cover digital assets.
