Reserve Bank to be given regulatory powers for digital wallets

The move to beef up the central bank’s powers and introduce more oversight comes after the ASX last month dumped a long-running technology upgrade of its trading system, following repeated delays.

For years, ASX had been working on a project to replace its clearing and settlement system, known as CHESS, with blockchain-based technology. But last month, the ASX scrapped the project, sparking blunt criticism from the country’s top financial regulators.

The CHESS system allows the ownership of financial products including bonds, equities and futures to be exchanged, and digitally registers the ownership of shares of listed companies.

In the week to December 9, an average of $6.5 billion was traded through the ASX each day.

Treasurer Jim Chalmers said the government was committed to making the financial system safer for businesses and consumers.

“The one constant in finance is change. It’s fast-moving, dynamic and our regulatory frameworks haven’t kept up,” he said.

Assistant Treasurer Stephen Jones said Australia “punches above its weight” in financial technology.

“The government wants this to continue and to establish regulatory settings which foster innovation, new businesses and provides consumer safeguards,” he said.

The government is also set to introduce legislation that would support competition to the ASX’s CHESS system in the clearing and settlement of cash equities.

“We will introduce legislation to facilitate competitive outcomes, should a competitor emerge and in the event of ongoing monopoly provision, in clearing and settlement by providing ASIC and the ACCC with additional powers,” Chalmers and Jones said in a media release.

The government wants to finalise a plan for the future of the country’s payments system early next year, and will release a consultation paper on Wednesday to get feedback from regulators, industries, consumer groups and businesses on priority areas, including the regulation of new payment systems.

In the work on modernising the country’s financial systems, the government has already started consulting on regulations for By Now, Pay Later products, and it will also keep working with the Reserve Bank on the case for a central bank digital currency.

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