As stablecoins become widely used as a means of payment, Australia is preparing to regulate them accordingly.
Australian financial regulators are “working on options” for incorporating payment stablecoins into the regulatory framework for stored-value facilities. Such incorporation would be a part of broader reforms to the payments regulatory framework in the country.
On Dec.8 the official site of the Reserve Bank of Australia published a report on stablecoins, assessing their recent developments, risks and regulatory prospects. Despite the high attention given to risks, in particular, the report is quite optimistic in acknowledging that “stablecoins have the potential to enhance the efficiency and functionality of a range of payment and other financial services.”
According to the report, the Australian regulators “are undertaking significant work” to figure out how to implement stablecoins into the national payment ecosystem without exposing it to excessive risks. Among such risks, authors cite energy and climate-related impacts, disruptions to funding markets, increasing bank exposure and liquidity risks.
The authors highlighted the particular fragility of algorithmic stablecoins, whose stability depends on investors’ confidence in the value of an unbacked crypto-asset, and cited the example of Terra collapse.
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The report reiterates that developing a framework for payment stablecoins is a priority in the near term for the CFR, “given the potential for these arrangements to become widely used as a means of payment and a store of value.”
In September, local Senator Andrew Bragg released a draft bill, titled Digital Assets (Market Regulation) Bill. The document calls for the introduction of licenses for digital asset exchanges, digital asset custody services and stablecoin issuers.
Brad Jones, Assistant Governor at the Reserve Bank of Australia, recently shared that its central bank digital currency (CBDC) pilot program in Australia has received more than 140 use case proposals from the finance industry. However, the central banker warns that such interest in CBDC could displace the Australian dollar and result in people avoiding commercial banks entirely.
