The Australian Government recently published an commentary on the state of FinTech in Australia, along with some of its plans and ideas to progress in the near future with the overall goal of becoming a leading FinTech player. The government recognises that to achieve this it will require getting policy settings right and backing local FinTech firms to maintain and develop a competitive advantage and global leadership in order to become the leading market for FinTech innovation and investment in Asia by 2017.
As part of its strategy for enabling this, the Australian Government noted a number of areas that would be worked in order to improve the chances for FinTech and FinTech companies to flourish. Some areas picked out were the regulatory environment, GST treatment of digital currency, blockchain technology and cyber security.
Regulatory environment that enables innovation, referred to as a ‘regulatory sandbox’, was one of the main areas focussed on, with the government wanting to provide a regulatory environment that provides consumers with confidence, while not unnecessarily restricting the opportunities for innovation. The hope is to encourage and support the design and delivery of new financial products and services that benefit consumers and businesses.
The Government has been working with the Australian Securities and Investments Commission (ASIC) on the development of a ‘regulatory sandbox’ for Australian FinTech start‑ups to allow innovators to overcome regulatory uncertainty and costs that may otherwise see offerings stifled. According to the industry an effective ‘sandbox’ will enable firms to manage regulatory risks during the testing stage, reducing the cost and time to market.
The Government believes that Australia’s financial system can support a ‘regulatory sandbox’ for the FinTech industry. ASIC has policies in place for the use of its waiver powers. At a minimum, the current arrangements can help reduce the regulatory barriers, and the cost of licensing for new businesses and products entering the market. For example, the existing ASIC class waiver for low‑value, non‑cash payment facilities has been important in facilitating businesses operating such types of payments. Since last year there has also been an Innovation Hub to help FinTech start‑ups navigate the regulatory laws.
ASIC’s Innovation Hub is currently working with its Digital Finance Advisory Committee on how to best utilise the existing regulatory arrangements and what further measures should be considered. The Government intends to support ASIC and other regulators on the development of the ‘regulatory sandbox’ and other facilitative measures that will help Australia in the FinTech market.
On the subject of the GST treatment of digital currency, the government admitted that that the current treatment of digital currency under GST law means that consumers are ‘double taxed’ when using digital currency to buy anything already subject to GST. The Australian Government claims it is committed to addressing this issue and will work with the industry on legislative options to reform the law relating to GST as it is applied to digital currencies with the aim of further developments or use in the future if adequate anti‑money laundering and counter‑terrorism financing rules are put in place.
Blockchain recognized as garnering significant interest and being used in a number of areas within the international financial system, with the possibility to revolutionise key services like international transfers between banks, equities clearing and settlement, and financial contracts.
The Government announced that it welcomed the announcement by the ASX that it is exploring blockchain technology for a new post‑trade solution for the Australian equity market. They recognize the potential to radically simplify the way the market operates end‑to‑end and significant benefits to investors, participants, regulators and government agencies.
Finally, strong cyber security was viewed as being essential to allow individuals and businesses to take advantage of the economic possibilities of the digital world. The government has committed to providing $30 million through to 2019–20 to establish a new industry‑led Cyber Security Growth Centre to grow and strengthen Australia’s cyber security industry.
The Cyber Security Growth Centre will facilitate improved engagement between research and business, improved access to global supply chains and international markets, improved management and workforce skills, and regulatory reform. The government hope this will ensure that Australia is a global industry leader, able to export products and services in the global marketplace while helping Australian businesses and governments to address the growing threat of cyber‑crime.