The Australian Prudential Regulation Authority (APRA), one of several top regulators reviewing payment mechanisms known as “stored value facilities”, said in a submission published on Tuesday that it could “potentially” oversee digital wallets holding large amounts of value, such as Calibra.
It made the comment while outlining recommendations for a new regulatory framework for stored value facilities from the Council of Financial Regulators. The council also includes the Reserve Bank, the Australian Securities and Investments Commission (ASIC) and the federal Treasury.
“The new framework is intended not only to be fit for purpose for the current financial system but also be able to accommodate future developments and technological advances, such as proposals for global stable coin eco-systems that have been the subject of significant attention in recent months,” APRA said in a submission to a Senate inquiry on financial technology, or fintech.
“Under this proposal APRA’s role in the framework would be to oversee wallets that are widely used as a means of payment and store significant value for a reasonable amount of time (e.g. potentially Facebook’s Calibra proposal),” it said.
APRA’s submission indicates that simpler products such as gift vouchers and pre-paid travel cards would face “minimal” regulation. APRA said it did not expect to oversee digital wallets designed to “pass payments through,” such as Apple Pay, which would instead be regulated by ASIC.
But large “deposit-like” products with more than $50 million in stored value, potentially including Calibra, would come under both ASIC and APRA’s purview, and would be subject to rules on minimum capital and requirements on risk management, governance and technology.
The plan for ASIC and APRA to oversee Calibra underscores the high level of scrutiny Facebook’s cryptocurrency push will attract from the financial authorities. The RBA has said the crytpocurrency should not be allowed to launch until all regulatory requirements are met.
Yet international bodies also see some benefits from the type of plan touted by Facebook and its partners in the Libra push, which include Uber and Spotify.
A G7 working group last year said cryptocurrencies backed by financial assets such as deposits – known as “stablecoins” – could help to make the global payment system “faster, cheaper and more inclusive” than it is today.
Even so, there has been scepticism about how much Australian consumers will want to make transactions in Libra. The RBA said in its submission to the same inquiry it was “unclear that there will be strong demand for global stablecoins,” as Australians were well served by cheap and fast payments through the existing banking infrastructure.
The RBA conceded that Australians “may not have been well served by banks” in the foreign exchange market, but said the growth of low-cost fintech forex firms were now offering much cheaper and faster services.