Australian government published a Token Mapping Consultation Paper yesterday, demonstrating its commitment to enhancing the way its legal framework handles digital assets to protect consumers better and keep pace with technical advancements.

Understanding the crypto ecosystem and maintaining a uniform and equitable approach to regulating crypto assets in Australia depends on Token Mapping. The Token Mapping just published primarily examines the areas where current regulation is applicable and paves the way for upcoming changes.

This document provides an essential first step in the government’s multi-stage reform programme, which will build suitable regulatory frameworks and foster innovation.

The paper also estimates that in the Fiscal Year of 2022, 1 million Australians will report crypto assets on their tax returns. When evaluated by purchasing power parity per capita, retail transactions through centralised exchanges in Australia rank 40th internationally for bitcoin adoption.

Australian authorities are concerned by the recent instability in the markets for crypto assets. They stated in the paper that markets for crypto assets had seen significant volatility since August 2022, with high-profile failures of crypto initiatives and organisations having made this slide worse.

With the volatility concern in mind, the paper points to the possibility that losses in this area could eventually affect the larger economy, especially given the increased exposure of Australian businesses and consumers to the performance of crypto assets.

The Different Crypto Ecosystems

As already known by crypto investors, the crypto ecosystem is not a homogenous sector. Crypto assets involve many distinct token kinds that stand in for many things, including communications, virtual items from video games, club memberships, bets, and legal claims to tangible assets, goods, and services.

They represented the different crypto tokens use cases as shown in the image below:

The Australian government avoided an “exhaustive, customised taxonomy” for cryptocurrencies. Instead, it chose a design that divides cryptocurrency into public networks or smart contracts on the one hand and intermediaries or service providers on the other. Officials want to know if the current financial restrictions will be adequate for these categories.

The consultation claims that “functionally-equivalent goods should be handled equally” by citing a 1997 financial systems inquiry.

After the Token Mapping Consultation Paper, the “logical next step” is establishing a licencing regime with minimum standards for crypto asset service providers, including secure custody, according to officials, who also intend to release a consultation proposing a licencing and custody framework for providers of crypto asset services in mid-2023.

~ By Jordano M. Z. ~