Australia's current financial services regulatory & compliance landscape is changing rapidly - Clyde & Co's weekly Regulatory Roundup will ensure you are up to date with the most important changes. In each edition, we will set out key developments from the past week for you to consider. 

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1. RBA flags potential for a wholesale ‘Central Bank Digital Currency’ as an alternative form of payment: The RBA has released a paper outlining the efficacy of a proposed 'Central Bank Digital Currency' (CBDC) in Australia. A CBDC would be another form of money, alongside cash and commercial bank deposits, that exists in the economy. The RBA considered the efficacy of a retail CBDC, which would be designed for use in retail payments by the general public, and a wholesale CBDC, which would be used in wholesale payments and settlements between financial institutions. A CBDC would allow for payments to be settled instantly, compared to the current payments system which takes days to settle. This is called 'atomic settlement'. This would reduce the role of intermediaries (such as banks) and brokers, reduce transaction costs and eliminate settlement risk. The RBA and Treasury's current assessment is that there is currently no public interest for issuing a retail CBDC in Australia. However, it said that introducing a wholesale CBDC would be much more likely and could be introduced incrementally. One of the reasons why the RBA is hesitant to issuing a retail CBDC is that it would make holding money in commercial retail banks less attractive, potentially reducing the pool of deposits that banks use to make loans. This could also lead to bank runs. Our full analysis is set out in this briefing. 

2. ASIC loses false or misleading conduct case against Retail Super, in part due to Retail Super’s reliance on external legal advice: Rest Super had told customers who wanted to take their savings elsewhere that they needed to keep $5,000 in their Rest account if their employer wanted to keep making contributions. ASIC alleged that these representations were false and misleading, and locked more than 31,000 customers who may otherwise have left into Rest accounts. In a decision handed down in the Federal Court on 18 September, Justice Beach held that these representations were not false or misleading and factually reflected Rest's policies about closing accounts. Beach J found that Rest was entitled to rely on external legal advice received in the period 9 September 2004 to 13 April 2018 to justify the reasonableness of their opinion that the statements were no more than representing Rest's opinion of the law.  This is another example of the increasing weight courts are placing on legal opinions in determining court outcomes (the other famous recent example being the Blockearner case). 

3. ASIC indicates that crypto industry participants ought to hold an AFS license: On 23 September 2023, ASIC Commissioner Alan Kirkland indicated that the crypto industry ought to hold an AFS license, with updated regulatory guidance set to be released within the next two months. ASIC is preparing to update Information Paper 225 which will clarify how particular crypto tokens and certain products should be treated. The paper is expected to be issued in November. This is because many crypto developers have not attained AFSLs based on legal advice that their products did not fall within the definition of 'financial product' for purposes of requiring an AFSL. This follows several court actions by ASIC against crypto industry participants over AFSL requirements, including against Block Earner and Finder Wallet. Separately, the Albanese government is preparing new legislation to require crypto exchanges to hold financial services licenses, and to set down rules for custody of digital assets, to reduce risks for investors in cryptocurrencies like bitcoin and Ethereum. Liam Hennessy spoke at the AFR's digital assets conference, and is quoted in the AFR article breaking these developments on ASIC's position here. 

4. Climate reporting bill receives Royal Assent: The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) passed Parliament on 9 September 2024 and received Royal Assent on 17 September 2024. The Bill will require certain businesses to prepare annual sustainability reports containing mandatory climate-related financial disclosures from 1 January 2025 onwards. The Bill will also enhance ASIC and the RBA’s licensing, supervisory and enforcement powers, which will provide ASIC with more capacity to monitor the ongoing conduct of financial market infrastructures (FMIs) entities, identify risks as they emerge, and take appropriate action to prevent those risks from escalating. FMIs are the key entities that enable, facilitate, and support trading in Australia’s capital markets. FMIs include financial market operators, benchmark administrators, clearing and settlement (CS) facilities, and derivative trade repositories.

5. ASIC reissues Regulatory Guide 121 – Doing financial services business in Australia: ASIC has reissued Regulatory Guide 121 - Doing financial services business in Australia - to reflect changes to the law and legislative relief granted by ASIC. The changes include: (1) removing references to expired or repealed AFS licencing relief, including class relief granted by ASIC to foreign financial services providers (FFSPs) and foreign collective investment schemes, (2) amending descriptions of AFS licensing exemptions and relief to reflect those currently available, (3) updating the description of the judicial interpretation of ‘carrying on a business in Australia’, such as the general indicators of carrying on a business, other relevant factors and when a one-off transaction may amount to the carrying on of a business, and (4) updating descriptions of, or references to, financial products and services, obligations of AFS licensees, legislation administered by ASIC, other applicable rules and legislation, and ASIC’s regulatory documents to reflect the current legal and regulatory framework. Regulatory Guide 121 provides guidance relevant for individuals and companies from outside Australia including when an individual or company from outside Australia may be required to hold an AFS licence to carry on a financial services business in Australia, circumstances in which an individual or company may be exempt from holding an AFS licence and some of the obligations associated with being an AFS licensee.

International perspective: On 11 September 2024, the UK government introduced the Property (Digital Assets etc) Bill, which provides that digital assets can be considered to be personal property under the laws of England and Wales, and could therefore be afforded the same legal protections as other, traditional categories of personal property. The Government has said that the introduction of the Property (Digital Assets etc) Bill will “… ensure Britain maintains its pole position in the emerging global crypto race by being one of the first countries to recognise these assets in law”.