Enabling a Safe and Productive Digital Asset Economy: TRM’s Response to Australia’s Token Mapping Consultation

On 3 February, the Australian government released its token mapping consultation paper setting out the direction of travel for crypto regulation in Australia. 

TRM Labs submitted a  response to the consultation paper, looking at how the Australian government might enable the safe and productive development of the local digital assets ecosystem , focusing on the following key considerations:

1. Clear and proportionate regulation

Keeping activity onshore enables governments to maintain regulatory oversight of crypto asset activities and better achieve consumer protection and other regulatory outcomes. However, given the borderless nature of crypto activities, it is impossible for governments to mandate that they remain onshore. Rather, governments can only encourage this with clear and proportionate regulation that achieves regulatory outcomes without placing an undue compliance burden on the industry. 

In this regard, it is important that the final crypto asset taxonomy makes clear the scope of regulated products and services, and that regulatory obligations take into account the unique characteristics of the digital assets and the blockchain technology that underpin it, borrowing from traditional finance regimes only when appropriate.

2. Public-private partnerships

The crypto asset sector is a relatively young one that is new to regulation compared to its traditional finance counterparts. At the same time, it is an extremely fast-moving space where innovators are constantly pushing the envelope of distributed ledger technology. With this in mind, public-private partnerships (“PPPs”) are essential in helping both policy and compliance professionals keep up to speed. PPPs build a common understanding between policymakers and the industry, which will help to ensure that the industry is able to grasp regulatory objectives and implement best practices that not only comply with regulatory obligations but effectively achieve the underlying objectives. PPPs also equip policy makers, regulators and law enforcement with tools, training and other expertise to move more quickly in achieving their aims. As such, remaining open to more continuous, representative and inclusive PPPs across the entire crypto asset ecosystemwhich will be beneficial to all involved parties.

3. Disruption of fraud, scams and other illicit activity

Consumer protection is front and center of many regulatory agendas following the events of 2022, highlighted by the consultation calling  for suggestions to engender good consumer outcomes. 

In this regard, it is important to highlight that the traceability and immutability of the blockchain offers unique opportunities to fight fraud, scams and other illicit activities. Blockchain intelligence demystifies the wealth of information on distributed ledgers and enables regulators, law enforcement and the crypto asset industry to identify and stop bad actors. Using regulatory and policy levers to encourage the use of blockchain intelligence as part of a comprehensive compliance programme for crypto assets will ensure that these tools are able to realize their full potential to fight illicit activity and help protect consumers.