The prudential regulator is in the process of drafting a letter to regulated firms on how it expects them to manage their work with digital assets, including stablecoins and cryptoassets.

Speaking to the American Chamber of Commerce in Australia, APRA chairman Wayne Byers confirmed the letter would not introduce new regulatory requirements but would set out the regulator’s expectations.

“In the immediate term, we would like to give regulated institutions more clarity about regulatory expectations,” Mr Byres said.

"Like our approach to climate risk, his core message is basically one of: 'by all means innovate, but proceed carefully and with full knowledge of the risks,'" he continued.

As cryptoassets move from the fringes of the internet to the global mainstream, governments are scrambling to figure out how to regulate an unfolding situation. What governments are grappling with is how to implement appropriate safeguards for consumers while leaving room for future innovation, growth and competition.

The Australian government recently proposed new licensing requirements for cryptoassets. In essence, the government has assumed that the most appropriate subject to be regulated is the secondary service providers of crypto assets that interact with users and allow them to more easily and seamlessly engage with the crypto ecosystem.

Speaking on Senate Estimates on Wednesday, Financial Services Minister Jane Hume defended the position of the government, which is often criticized for being late on the issues.

"What we have said is that we will regulate intermediaries, third party providers, brokers, custodians and exchanges so that there is the equivalent of a tick of approval by those third parties through which cryptocurrencies are distributed traded or held or exchanged," said Mrs. Hume.

"That way, Australian investors can have some level of confidence that what they're investing in is real."

Ms. Hume emphasized that despite the rise of crypto scams, the government has no intention of banning crypto.

"We don't think it's a good idea," Ms Hume told Senate Estimates.

“I know my colleague, Mr Jones, at one stage was talking about banning cryptocurrency investment above $10,000 along with some bans on cash, we don't think that's the way to go. We want to see a thriving technology sector and encourage innovation in this space, but at the same time we want to make sure that consumers are protected from the harm of fraudsters.”

A new report from crypto exchange Gemini recently found that 18 percent of Australians own crypto. The country lags in adoption compared to other APAC countries surveyed, including Singapore at 30 percent, Hong Kong at 24 percent, Indonesia at 41 percent and India at 20 percent.

Gemini also found that Australians are still cautious about crypto, with 53 percent of respondents citing fear of losing money as the main barrier to crypto adoption.

Maja Garatsa Djurdjevic

Maya's career in journalism spans more than a decade in finance, business and politics. Already an experienced editor and reporter in all elements of the financial services sector, before joining Momentum Media, Maya reported for several established news outlets in South East Europe, looking at key processes in post-conflict societies.