The Australian Federal Budget for FY24-25 was announced last night with broad changes across key areas and new funding allocation for regulators and initiatives. The changes are sweeping with some noteworthy priorities sure to affect Australia's developing crypto regulation. We've set out some of those priorities below:
Modernising Digital Assets and Payments Regulation
$7.5 million is being allocated to the development of digital asset regulation and licensing frameworks. This funding comes on the back of previous moves the Australian Government has made to understand the crypto space and develop regulation.
"The Government will provide $7.5 million over four years from 2024–25 (and $1.5 million per year ongoing) to modernise regulatory frameworks for financial services to improve competition and consumer protections for services enabled by new technology, including to:
• develop and consult on legislation to licence and regulate platforms that hold digital assets and progress related reforms, including continuing exploratory work on Central Bank Digital Currencies, asset tokenisation and decentralised finance
• introduce a new regulatory framework for payment service providers (including digital wallets and electronic stored value providers), including licensing and a mandated ePayments Code.
The Government will consider future funding requirements to implement the proposed reforms informed by the development of legislation."
Funding for Regulators
A number of regulators get a big shot in the arm across a variety of different priorities including the development of the "Scams Code Framework", measures to promote and enforce sustainable financial markets and Data Capability. Some of the highlights:
$37.3 million over four years from 2024–25 to administer and enforce mandatory industry codes for regulated businesses to address scams on their platforms and services. Telecommunications, banks and digital platforms services related to social media, paid search engine advertising and direct messaging will be initially targeted. The funding is allocated to the the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investments Commission (ASIC) and the Australian Communications and Media Authority (ACMA).
$6.3 million in 2024–25 for the ACCC to improve public awareness of scams and help the public to identify, avoid and report scams
$1.6 million over two years from 2024–25 for the Treasury to develop and legislate the overarching Scams Code Framework. Budget Measures Paper No.2 notes:
"Partial funding for this measure will be held in the Contingency Reserve pending development of the preferred legislative approach for the Scams Code Framework."
$10.0 million over four years for resourcing for ASIC to investigate and take enforcement action against market participants engaging in greenwashing and other sustainability-related financial misconduct
$5.3 million over four years to deliver the sustainable finance framework, including issuing green bonds, improving data and engaging in the development of international regulatory regimes related to sustainable finance with funding allocated to for the Treasury, ASIC and the Australian Prudential Regulation Authority (APRA)
$206.4 million over four years to ASIC and APRA to improve the data capability and cyber security of those regulators.
$160.8 million over two years for the Australian Transaction Reports and Analysis Centre (AUSTRAC) to expand its regulatory, intelligence and data capabilities and provide guidance to newly regulated entities.
$7.0 million over four years to support implementation of the anti-money laundering and counter-terrorism financing (AML/CTF) legislative reforms capable of delivery in the Pacific.
$145.4 million over two years from 2024–25 to maintain the National Measurement Institute’s core scientific measurement and ICT capabilities and to support current site operations and future planning.
Taxation
The paper is silent on funding for the much hoped for reforms following the Board of Taxation's report to the Australian government on the tax treatment of digital assets and transactions in Australia.
However, amongst a plethora of tax concessions and cuts for small businesses and individuals the paper also details that the ATO will receive additional funding to beef up its compliance capabilities to counter fraud and other instances of non-compliance by taxpayers. This includes:
$78.7 million for upgrades to information and communications technologies to enable the ATO to identify and block suspicious activity in real time .
$24.8 million to improve the ATO’s management and governance of its counter-fraud activities, including improving how the ATO assists individuals harmed by fraud.
Responsible AI
The government also turns its attention to the development of AI policy with some target funding on several initiatives in this space including:
$21.6 million over four years to establish an AI advisory body within the Department of Industry, Science and Resources - the National AI Centre (NAIC).
$15.7 million over two years to support industry analytical capability and coordination of AI policy development, regulation and engagement activities across government.
$2.6 million over three years from 2024–25 to respond to and mitigate against national security risks related to AI.
Quantum Computing
Finally, we have some noteworthy support for Psiquantum, the Brisbane-based tech company building what is reportedly the "world's first" useful quantum computer who receive $466.4 million for a financing package of equity and loans provided on the National Interest Account.
The budget papers report that:
"Additional funding of $27.7 million over 11 years from 2023–24 will also be provided for the Department of Finance, the Department of Foreign Affairs and Trade, the Department of Industry, Science and Resources and the Department of the Treasury to manage and provide oversight of this investment."
Budget Takeaways
Reading the Federal Budget tea-leaves gives us only broad insight into the allocation of funds but it is clear that the Australian Government intends to press ahead with the proposed regulatory reforms for regulating digital asset platforms. The Government are clearly hedging their bets on future funding which does seem to suggest a lack of clarity in anticipating required funding for regulators to implement any proposed reforms. However, the funding statement for AUSTRAC, who currently impose a registration requirement on digital exchanges, does include a mention of "guidance to newly regulated entities" which may provide some insight into the expectations Government have as to which entities will be involved in the proposed regulatory reforms.
There is a lot to be learned from the budget, but it is difficult to have certainty on the direction these initiatives will take. On a general overview, more funding for digital innovation and tech is a very good thing. The government just has to be cautious in finding the balance between promoting innovation, and taking enforcement actions against true harm to Australians.
Regulation need not be heavy, nor light. It should be smart.
By Tim Masters, Luke Higgins and Michael Bacina
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