INTHEBLACK August 2022 - Magazine - Page 10
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// C PA A U S T R A L I A P O L I C Y
AT A G L A N C E
AUGUST
UPDATE
Dr Jana Schmitz is
CPA Australia’s digital
economy policy lead.
Australian financial
regulators’ efforts to
regulate crypto assets
aren’t without their
challenges.
There’s no apparent
consensus among
accounting bodies,
organisations or standard
setters on how to account
for crypto assets.
CRYPTO
CHALLENGE
THE UPHEAVAL IN CRYPTO MARKETS SIGNALS AN URGENT NEED FOR REGULATORY CHANGES
WITHIN THE CRYPTO ECOSYSTEM. WE EXPLORE SOME OF THE DEVELOPMENTS AND CHALLENGES
FACED BY AUSTRALIAN FINANCIAL REGULATORS THAT ALSO AFFECT THE ACCOUNTING FOR
CRYPTO-BASED TRANSACTIONS.
T
CLICK HERE
TO READ
CPA Australia’s
policy submission
on EFRAG’s
discussion paper
on accounting for
crypto asset
liabilities
he recent crypto market downturn has sharpened
policymakers’ awareness of the need for better
regulation within the crypto ecosystem.
Aside from the widespread losses incurred
by investors and the collapse of certain projects, the
turmoil has exposed vulnerabilities within blockchain
protocols and systemic concerns within the crypto
landscape. The result has been lower crypto prices and
slower activity, which offers a slight – yet temporary –
reprieve from the urgency of the regulatory task.
The regulatory agenda of multiple international
policymakers reveals that key priorities will include
consumer protection, financial stability, market conduct
and anti-money laundering rules, among others, while
also striking a balance that enables and fosters continued
innovation in financial markets.
POLICY PERSPECTIVE
CLICK HERE
HERE TO
BORROW
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10 ITB August 2022
While the policy stance is fragmented across jurisdictions,
S&P Global views Australia as “crypto supportive” and
“advanced” in policy formation. Along with Switzerland,
Singapore and the United Arabic Emirates, Australia is
seen as more crypto-friendly than most in terms of
regulations surrounding crypto assets. Nevertheless,
several regulatory challenges lie ahead.
The Australian Treasury recently concluded its
consultation on the licensing and custody requirements
of crypto asset secondary service providers. Treasury’s
proposals included, among others, the development of
one definition of a crypto asset that applies to all
relevant Australian regulatory frameworks. According to
the Australian Securities and Investments Commission,
a crypto asset is “a digital representation of value or
contractual rights that can be transferred, stored or
traded electronically, and whose ownership is either
determined or otherwise substantially affected by a
cryptographic proof”.
Foreseeing a definitional conflict arising between the
proposed definition and the definition of “asset” for
financial reporting purposes under the Australian
Accounting Standards (AAS), which form part of the
Australian regulatory framework, CPA Australia
recommends that the crypto asset definition be aligned
with the definition of an “asset” under AAS.
In the context of international accounting regulation,
CPA Australia notes that the European Financial
Reporting Advisory Group (EFRAG), in its January 2022
issues paper, recommends that the International
Accounting Standards Board (IASB) develop clarifying
application guidance to address a range of crypto asset
(and liability) holders, issuers and valuation topics,
alongside scoping crypto assets out of IAS 2 (Inventories)
and IAS 38 (Intangible Assets) and into IFRS 9 (Financial
Instruments) or IAS 40 (Investment Property). These
proposals recommend revisiting the agenda decision
published in 2019 by the IFRS Interpretations Committee
(IFRIC), concluding that holdings of cryptocurrencies
should be accounted for under IAS 38 unless they are
held for sale in the ordinary course of business, in which
case IAS 2 applies. Back then, the committee decided
that cryptocurrencies didn’t meet the definition of
financial assets in IFRS 9. The IASB hasn’t responded to