The Department of Home Affairs on Friday said it agrees with submissions from industry that government currently does not have the technological capability for implementing a travel rule for cryptocurrencies.
A travel rule, if ratified, would require financial institutions to pass certain information onto another financial institution to provide more transparency regarding cryptocurrency movement.
The travel rule was recommended by the Financial Action Task Force (FATF) in May as it believed the rule would aid in preventing terrorists and other criminals from having unfettered access to electronically-facilitated funds transfers for moving their funds and for detecting such misuse when it occurs.
"I think it depends on the way that [the travel rule] is implemented so a technological solution that takes a lot of the legwork out of that would be a game changer. [But] we are not at the point where, globally, there is such a technological solution," said Home Affairs assistant secretary Daniel Mossop, who appeared before the Senate Committee on Australia as a Technology and Financial Centre on Friday afternoon.
Australian Transaction Reports and Analysis Centre (Austrac) national manager Bradley Brown shared a similar sentiment during the hearing, saying a solid basis for a technological solution for facilitating the travel rule would be required if the travel rule were to go live.
Brown's input to the committee is an update of Austrac's view of the travel rule. Shortly after the FATF recommended the rule, Austrac CEO Nicole Rose said her agency was interested in regulating the exchanges that "turn cash into cryptocurrency" and would consider the merits of implementing the rule within Anti-Money Laundering and Counter-Terrorism Financing regulation.
Later in the afternoon, the committee questioned Australian Securities and Investments Commission (ASIC) representatives about the scope of Australia's regulatory powers in relation to crypto assets. Commissioner Cathie Armour said ASIC's own powers currently were limited when regulating crypto assets, clarifying that it can only regulate crypto assets if they are a financial product.
Armour added that Australian regulation of crypto assets has primarily been an exercise of crime enforcement rather than financial regulation.
Committee chair Senator Andrew Bragg then asked whether Parliament could enact custody arrangements for digital assets in the financial space that leverage existing rules.
Armour explained that this would be dependent on how Australia wants to regulate crypto assets.
"Is it as a separate category that they decide covers all digital assets? Or is it more an identification of which digital asset might fit into the existing categories of financial products better," she said.
"I think once your committee has considered what would be the best approach there, that could happen," Armour said.
The committee is currently in the last phase of its inquiry, which is focusing on removing more barriers to Australian growth as a technology and finance centre. The inquiry first kicked off in October 2019.