The Australian Treasury has taken a significant step towards regulating the crypto industry with the release of its “Token Mapping” consultation paper. The paper outlines a taxonomy of four types of crypto-related products and defines key concepts in the industry, including “crypto networks,” “crypto tokens,” and “smart contracts.”
“This is a foundational step in the Government’s multi-stage reform agenda to regulate the market,” said the Australian Treasury in a statement. “Our goal is to inform a fact-based, consumer conscious, and innovation-friendly approach to policy development.”
The paper defines a “crypto network” as a “distributed computer system capable of hosting crypto tokens.” The primary function of these networks is to store information and process user instructions. Examples of well-known public crypto networks cited in the paper include Bitcoin and Ethereum.
A “crypto token” is defined as a unit of digital information that can be “exclusively used or controlled” by a person who does not administer the host hardware where the token is recorded. This concept of “exclusive use and control” distinguishes crypto tokens from other digital records.
The paper also defines “smart contracts” as computer code that has been published to a crypto network’s database. These contracts can involve intermediaries or can be performed by the network in the absence of intermediaries.
The taxonomy outlined in the paper categorizes four types of crypto-related products: crypto asset services, intermediated crypto assets, network tokens, and smart contracts on a spectrum from “intermediated” to “public.” Crypto asset services include lending and borrowing, fiat on/off ramping, crypto token trading, funds management, mining/staking-as-a-service, gambling, and custody. Intermediated crypto assets, which include stablecoins, are rights or licenses in relation to event access or subscriptions, intellectual property, reward programs, consumer goods and services, fiat money, non-financial assets, and government bond coupons. Network tokens, like original Bitcoin, are described as a “new type of currency” constituting peer-to-peer payment infrastructure.
While the paper does not propose any specific legislative initiatives, the authors anticipate that existing laws will easily be tailored to fit a large portion of the crypto ecosystem. The Treasury will accept feedback on the paper until March 3, and a similar paper on the possible licensing and custody framework for crypto is expected to be released in mid-2023.
The release of the “Token Mapping” consultation paper follows the recent publication of a similar consultation paper by the UK Treasury, which emphasized that existing laws, such as the Financial Services and Markets Act, are capable of covering digital assets.