Sydney: Australia will create a licencing framework for cryptocurrency exchanges and consider launching a retail central bank digital currency as part of the biggest overhaul of its A$650 billion-a-day ($463 billion) payments industry in a quarter of a century.
The country will also broaden its payment laws to cover online transaction providers like Apple Inc and Alphabet Inc's Google as well as buy-now-pay-later (BNPL) providers like Afterpay Ltd, ending their run of operating without direct supervision.
"If we do not reform the current framework, it will be Silicon Valley that determines the future of our payment system," Treasurer Josh Frydenberg said in speech. "Australia must retain its sovereignty over our payment system."
Australia's conservative government is positioning itself at the front of global efforts to rein in large technology companies, while taking a more inclusive approach than countries like India and China, which have criminalised cryptocurrency.
The use of cryptocurrency and non-cash payments has exploded in Australia during the pandemic as people's lives shifted online.
About 55 million non-cash payments are made in Australia every day, according to government data, with almost half the population using their phones to make payments. The number of Australians transacting in cryptocurrency has surged 63% so far this year, compared with last year.
Frydenberg said the government would begin consultation in early 2022 on establishing a licencing framework for digital exchanges, allowing the purchase and sale of crypto assets by consumers in a regulated environment.
The government would also consult on regulating businesses that hold crypto assets on behalf of consumers, and on the feasibility of a central bank digital currency, Frydenberg added.
A spokesperson for Afterpay, which has agreed to a buyout from Square Inc, the payments firm of Twitter Inc founder Jack Dorsey, said it supported "any approach that takes into account consumer benefits from the innovation and competition Afterpay has brought to the market".
Apple declined to comment while Google had no immediate comment.
Gerard Brody, chief executive of the Consumer Action Law Centre, said regulating crypto exchanges would recognise those entities "are now holding significant sums of peoples' money and investments".
Regulating BNPL companies would "address the significant risk of debt and financial stress associated with these products," Brody added in a statement.
Australia's move was a "timely and sensible response," said Chloe White, a former federal government adviser on cryptocurrency who now runs Genesis Block, a consultancy firm providing industry with advice on digital asset regulation and policy development.
"There will be a lot of enthusiasm from industry participants to be involved in working through the details", added White in an email.
Australia's approach is in line with U.S. regulators, who have said they want to establish a regulatory framework to allow banks to facilitate ownership of crypto assets for customers.
In Britain, regulators have called for powers to govern the online promotion of crypto assets to combat a flood of "problematic content".
At the other end of the spectrum, India's proposed laws would subject anyone using crypto as a payment to arrest without a warrant, while Chinese regulators have already slapped a ban on both crypto transactions and mining.