The Senate Select Committee on Financial Technology and Regulatory Technology Select Committee on Financial Technology and Regulatory Technology Interim report September 2020 © Commonwealth of Australia 2020 ISBN 978-1-76093-108-7 This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License. The details of this licence are available on the Creative Commons website: http://creativecommons.org/licenses/by-nc-nd/3.0/au/. Printed by the Senate Printing Unit, Parliament House, Canberra Committee Members Chair Senator Andrew Bragg LP, NSW Deputy Chair Senator Marielle Smith ALP, SA Members Senator Susan McDonald NATS, QLD Senator Rex Patrick IND, SA Senator Paul Scarr LP, QLD Senator Jess Walsh ALP, VIC Secretariat Lyn Beverley, Committee Secretary Christopher Sautelle, Principal Research Officer Kate Campbell, Senior Research Officer Elise Gruttner, Senior Research Officer Claire Rhodes, 2019 Graduate Program Margaret Cahill, Research Officer Shannon Ross, Administrative Officer Committee Webpage: http://www.aph.gov.au/senate_FinRegtech PO Box 6100 Phone: + 61 2 6277 3535 Parliament House Fax: + 61 2 6277 5818 Canberra ACT 2600 Email: [email protected] Australia iii Table of Contents Committee Members ........................................................................................................................ iii List of Recommendations ............................................................................................................... vii Chair's Foreword ............................................................................................................................. xiii Executive Summary .......................................................................................................................... xv Abbreviations list ............................................................................................................................. xxi Chapter 1—Introduction and background ..................................................................................... 1 Introduction .......................................................................................................................................... 1 Background .......................................................................................................................................... 3 Chapter 2—Responding to COVID-19 .......................................................................................... 23 Key impacts and opportunities arising from COVID-19 .............................................................. 23 Technology enablers during the pandemic crisis and recovery period ..................................... 29 Chapter 3—Tax Issues ...................................................................................................................... 59 Overview of business taxation in Australia ................................................................................... 59 R&D tax incentive .............................................................................................................................. 62 Payroll tax ........................................................................................................................................... 81 Employee Share Schemes ................................................................................................................. 82 Tax treatment of Initial Coin Offerings ........................................................................................... 84 Chapter 4—Regulation Issues ........................................................................................................ 87 Overview of Australia's regulatory environment for FinTechs .................................................. 87 Regulation of competition, innovation and global competitiveness in financial services ....... 90 Access to the New Payments Platform ......................................................................................... 113 Blockchain and distributed ledger technologies ......................................................................... 120 Foreign exchange pricing and transparency ................................................................................ 126 Chapter 5—Regulation issues - Consumer Data Right ............................................................ 131 Implementation of Open Banking ................................................................................................. 131 Expansion of the Consumer Data Right to other sectors............................................................ 156 Governance arrangements for the Consumer Data Right .......................................................... 164 Chapter 6—Access to Capital ........................................................................................................ 167 Support measures relating to COVID-19 ...................................................................................... 167 Refinements to ESVCLP and ESIC incentives .............................................................................. 174 v Collaboration between large and small businesses ..................................................................... 183 Encourage superannuation funds to invest more broadly ........................................................ 186 Consideration of national interest issues in relation to investment capital ............................. 189 Chapter 7—Issues relating to Culture and Skills ..................................................................... 191 Culture ............................................................................................................................................... 191 Skills ................................................................................................................................................... 199 Chapter 8—Conclusion and recommendations ......................................................................... 207 COVID-19 recovery measures (Chapter 2) ................................................................................... 207 Tax issues (Chapter 3) ..................................................................................................................... 212 Regulation issues (Chapter 4) ......................................................................................................... 214 Refine and expand the Consumer Data Right (Chapter 5) ........................................................ 218 Access to Capital (Chapter 6) ......................................................................................................... 221 Culture (Chapter 7) .......................................................................................................................... 223 Skills and training (Chapter 7) ....................................................................................................... 224 Dissenting Report from Labor Senators ..................................................................................... 227 Additional Comments from Senator Scarr ................................................................................. 237 Appendix 1—Submissions, Additional information and Answers to questions on notice 239 Appendix 2—Public hearings and witnesses ............................................................................ 249 vi List of Recommendations Recommendation 1 8.9 The committee recommends that the Corporations Act 2001 be amended to allow companies to decide the best format for holding their annual general meetings and other prescribed meetings (whether through virtual meetings, in-person meetings or hybrid meetings), while ensuring the needs of shareholders are taken into account. Recommendation 2 8.10 The committee recommends that the Corporations Act 2001 be amended to enable companies to communicate with shareholders electronically by default, with shareholders retaining the right to request paper-based communications on an opt-in basis. Recommendation 3 8.14 The committee recommends that the Corporations Act 2001 and other relevant legislation and regulations be amended in order to allow for the electronic signature and execution of legal documents. Recommendation 4 8.15 The committee recommends that relevant regulations be amended in order to enable the witnessing of official documents via videoconferencing or other secure technological means. Recommendation 5 8.19 The committee recommends that Medicare telehealth items introduced during the pandemic be made a permanent feature of the Australian healthcare system, with ongoing refinement and review as appropriate. Recommendation 6 8.22 The committee recommends that work on implementing ePrescriptions in Australia continue as quickly as possible, and that the Australian Government ensure an open and accessible market for ePrescription services. Recommendation 7 8.29 The committee recommends that the Digital Identity reforms led by the Digital Transformation Agency be accelerated in order to deliver a national, vii economy-wide framework for the operation of a federated digital identity ecosystem as soon as possible. Recommendation 8 8.34 The committee recommends that the Australian Government explore options to promote the use of RegTech solutions in assisting small and medium-sized enterprises to comply with their obligations under industrial awards. Recommendation 9 8.38 The committee recommends