AUSTRALIA Law and Practice Contributed by: Steven Pettigrove, Katrina Sharman, Luke Higgins and William Deeb, Piper Alderman
1.1.3 Regulation of Blockchain Technology Approach of the Australian Government and Regulatory Bodies Australia adopts a facilitative but risk-focused approach to blockchain-related industries, seeking to encourage innovation while maintaining strong safe- guards for consumer protection and market integrity. Government policy, led by the Treasury and ASIC, aims to position Australia as a leader in the global digital asset ecosystem. This objective is reflected in Treasury’s policy statements on developing a digital asset industry and ASIC’s strategic focus on mitigat- ing financial, conduct and illicit finance risks. This balance is reflected in recent reforms, including the passage of the DAF Act, which applies tailored financial services regulation to digital asset businesses and the AML/CTF Act reforms designed to strengthen the detection and disruption of financial crime. In practice, this has resulted in a distinction between blockchain infrastructure applications and higher risk, client facing services. Both the DAF Act and AML/ CTF Act provide relief for infrastructure or back end blockchain use, whereas consumer facing or value- transfer activities attract more prescriptive oversight and enforcement. There is no general prohibition on blockchain applications; rather, regulation targets specific activities and services. Australia adopts a technology-neutral approach, whereby existing legal frameworks govern the under- lying activity. If a blockchain-enabled solution involves a financial product or service (such as custody, settle- ment or trading), entities must comply with applicable licensing, conduct and disclosure obligations under the Corporations Act 2001 (Cth) (Corporations Act). Similarly, AML/CTF obligations arise where activities constitute designated services under the AML/CTF Act. The use of distributed ledger technology does not displace regulatory accountability. Firms remain responsible for compliance and must maintain appro- priate governance, oversight and risk management. Data Privacy Data privacy is primarily governed by the Privacy Act 1988 (Cth) (Privacy Act) and the Australian Privacy Principles, which apply equally to blockchain-based
recently implemented reforms to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) will further increase compliance obligations for digital asset service providers. Intellectual Property Australia’s IP framework is generally technology-neu- tral, allowing existing regimes to apply to computer software and underlying code and patent protection may be available for technical innovations in block- chain systems where the patentability criteria are sat- isfied. However, there are currently no bespoke leg- islative provisions specifically directed at blockchain technology. 1.1.2 Regulatory Sandbox There is no specific regulatory sandbox for block- chain-based projects in Australia, albeit the Austral- ian government launched consultations to reform the Enhanced Regulatory Sandbox (ERS) to more effec- tively promote fintech innovation. The ERS permits a business to test certain innovative financial services or credit activities without needing to obtain an AFSL or an Australian credit licence (or vary an existing licence) for up to two years. However, before participating, businesses must satisfy eligibil- ity requirements, including demonstrating that the service is innovative and that it delivers a net public benefit and remain subject to ongoing conduct and reporting obligations while operating in the sandbox. The consultation paper recognises that the current sandbox design: • has seen limited participation; • faces strict entry requirements; • lacks a clear path to full licensing; and • imposes significant restrictions on the range of services eligible for testing. As a result, the Government is considering reforms, including expanding the scope of eligible activities and improving the transition from sandbox testing to full authorisation, while maintaining the core objec- tive of allowing innovative businesses to test services before obtaining a licence.
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