Following the global regulatory race, Australia opened the public consultation on its own taxonomy of crypto assets. The national regulators propose to distinguish four major types of products related to the crypto industry.
On Feb. 3, the Australian Treasury released a consultation paper on “Token Mapping,” announcing it as a foundational step in the Government’s multi‑stage reform agenda to regulate the market. It seeks to inform “a fact‑based, consumer conscious and innovation-friendly” approach to policy development.
The paper, based on the “functional” and technology-neutral method, proposes a number of basic definitions for all the things crypto.
At the first level, it outlines the key concepts of ‘crypto networks,’ ‘crypto tokens,’ and ‘smart contracts.’ According to the Treasury’s vision, a crypto network is a distributed computer system capable of hosting crypto tokens. Its primary function is to store information and process user instructions. The paper cites Bitcoin (BTC) and Ethereum (ETH) 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 doesn’t administer the host hardware where that token is recorded. The concept of ‘exclusive use and control’ is a key distinguishing factor between crypto tokens and other digital records, according to the paper.
A ‘smart contract’ goes as the computer code that has been published to a crypto network’s database. It involves intermediaries or agents performing functions pursuant to promises or other arrangements or functions being performed by crypto networks in the absence of promises, intermediaries and agents.
Starting from these simple definitions, a paper proposes its taxonomy of four types of crypto-related products:
- Crypto asset services, which include lending and borrowing, fiat on/off ramping, crypto token trading, funds management, mining/staking-as-a-service, gambling, and custody.
- Intermediated crypto assets, which are the closest to a wide-spread definition of tokens: rights or licenses in relation to event access or subscriptions, intellectual property, reward 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” constituting peer-to-peer payment infrastructure. Think of your original BTC.
- Smart contracts exist on a spectrum from ‘intermediated’ to ‘public.’ The former is used by intermediaries in providing a service; the latter is used by parties to remove the need for an intermediary.
While the paper proposes to start the discussion on this taxonomy and doesn’t provide any legislative initiatives, its authors anticipate a relatively easy tailoring of existing laws for a large portion of the crypto ecosystem. It is the pockets of the ecosystem where functions are being ensured by the public, self-service software, which could demand the creation of a brand-new legislative framework.
The Treasury will wait for feedback up until March 3. The next major step of a national regulatory discussion will come with a release of a similar paper on the possible licensing and custody framework for crypto in mid-2023.
On Feb.1, His Majesty’s Treasury of the United Kingdom published its consultation paper for the crypto regulation as well. In it, the financial authority emphasized the lack of necessity in the separate legislation, given the capacity of the existing Financial Services and Markets Act to cover digital assets.