Following the global regulatory race, Australia opened public consultation on its own taxonomy of crypto assets. National regulators propose to distinguish four main types of products related to the crypto industry.

On February 3rd, the Australian Treasury published a consultation paper on “Token Allocation”, announcing it as a critical step in the Government’s multi-stage reform agenda to regulate the market. It seeks to inform a “fact-based, consumer-aware, and innovation-friendly” approach to policy development.

The document, based on the “functional” method and technologically neutral, proposes a series of basic definitions for all things cryptographic.

At the first level, it describes the key concepts of ‘crypto networks’, ‘crypto tokens’ and ‘smart contracts’. In Treasury’s view, a crypto network is a distributed computing system capable of hosting crypto tokens. Its main function is to store information and process user instructions. The document cites Bitcoin (BTC) and Ethereum (ETH) as the two best-known public crypto networks.

Related: Australia Strengthens Crypto Gatekeepers in ‘Multi-Stage’ Plan to Fight Scams

A ‘cryptographic token’ is defined as a unit of digital information that can be ‘exclusively used or controlled’ by a person who does not manage the host hardware where that token is registered. The concept of ‘exclusive use and control’ is a key distinguishing factor between cryptographic tokens and other digital records, according to the document.

A ‘smart contract’ is computer code that has been posted to the database of a cryptographic network. These are intermediaries or agents that perform functions pursuant to promises or other arrangements or functions that crypto networks perform in the absence of promises, intermediaries, and agents.

Building on these simple definitions, one paper proposes its taxonomy of four types of crypto-related products:

Crypto asset services, including lending and lending, fiat phasing on/off, crypto token trading, fund management, mining/staking as a service, gambling and custody. Intermediated crypto assets, which are closest to a generalized definition of tokens: rights or licenses in relation to access to events or subscriptions, intellectual property, reward programs, consumer goods and services, fiat money, non-financial assets, and government bonds government. coupons This class includes stablecoins. Network tokens: a “new type of currency” that constitutes a peer-to-peer payment infrastructure. Think about your original BTC. Smart contracts exist on a spectrum from ‘middleman’ to ‘public’. The first is used by intermediaries in the provision of a service; the latter is used by the parties to eliminate the need for an intermediary.

While the document proposes to start the discussion on this taxonomy and does not provide any legislative initiative, its authors anticipate a relatively easy adaptation of existing laws for a large part of the crypto ecosystem. They are the pockets of the ecosystem where functions are being ensured by public self-service software, which could require the creation of an entirely new legislative framework.

Treasury will wait for comment until March 3. The next major step of a national regulatory discussion will come with the publication of a similar document on the possible licensing and custody framework for crypto in mid-2023.

On February 1, Her Majesty’s Treasury of the United Kingdom also published its consultation document for the regulation of cryptocurrencies. In it, the financial authority stressed the lack of need in separate legislation, given the ability of the existing Financial Services and Markets Law to cover digital assets.

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