Jaime Lumsden joins Amy-Rose Goodey on The House is Digital for a conversation on what it really takes to build innovative financial products in Australia.
As a financial services regulatory lawyer working across fintech, payments and digital assets, Jaime has spent years helping businesses navigate the intersection between ambitious ideas and complex regulation.
The discussion explores why legal and regulatory considerations need to be embedded early in product development, the cost of regulatory uncertainty, Australia’s evolving digital asset framework, stablecoins, AI agents and the growing convergence between traditional finance and blockchain.
Jaime also shares why regulatory certainty matters for innovation and how tokenisation could create liquidity and open new investment opportunities.
A practical conversation about getting the balance right between innovation, consumer protection and giving Australian businesses the confidence to build.
speaker-0: It’s my pleasure. Thank you very much for having me.
speaker-1: I want to talk to you. you’re a financial services lawyer. You engage quite deeply with all size businesses when it comes to fintech and digital assets. So when we think of a business and building a business, particularly here in Australia, we love innovation. But innovation ⁓ sometimes has its risks associated. So today I really want to dive into how Australian businesses are surviving. when they’re building innovative products that are quite risky. And how do you advise them on that? So I I guess I’ll start with a little bit of a story about what you do, who you are, maybe a little bit about Hamilton Locke and the types of clients or businesses that you work with.
speaker-0: Yeah, sure. ⁓ yeah, so I’m a partner in the funds and financial services team at Hamilton Lock, and financial services is obviously broader than digital assets. But I have picked up digital assets as part of my practice since about 2018. and it ended up being an adjunct to what was already probably an innovative and fintech-y practice. ⁓ so doing a lot of work sort of in in payments and consumer credit ⁓ and other sort of weird and wonderful things. So I’d done horse racing syndicates and the Catholic Church’s charitable fundraising. Banking system. ⁓ So anything that was sort of strange came my way. And blockchain wasn’t mine to start with. It actually belonged to the founding partner of then the fold. ⁓ But then she retired and I had to go somewhere and somehow it wound up on my desk. And ⁓ thank goodness, yes, because it’s ⁓ definitely the most interesting thing I’ve ever done. ⁓ and the very first ⁓ blockchain project that I did was the gold and silver standard tokens back in 2018. Wow.
speaker-1: Okay. My goodness.
speaker-0: ⁓ so ⁓ that that was my introduction. Yeah, and we’re like h I’m trying to figure out like how how do you even do a token holder agreement? ⁓ how you know, in a frictionless digital environment, ⁓ how do we build agreements that we can get people to agree to and then secondary trading and things like that. ⁓ so yeah, that was a bit of a ⁓ baptism by far. But but yeah, that’s where I start.
speaker-1: Story too. And so when let’s go back to 2018 then and the way that people were building their businesses, that sounds quite out of the box for back in 2018. I don’t think there was a lot of fintechs even back then. There was a few payments innovations and you’d probably know more about that. Was that front of mind that obviously they came to you and you were working on that? But did they come to you because perhaps it wasn’t embedded in their business or that it been w why were you working with
speaker-0: It absolutely was not embedded in their business. They were not a financial services business. They’re a a vault. They sell bull they sell bullion. Yeah. so ⁓ yeah, that’s definitely and and see a lot of founders like that ⁓ in digital assets. Also in fintech in general, people who are coming out of like the tech side, who have a strong background in tech or have somebody in their business who’s got a strong background in tech, ⁓ who want to do something in the tech space, whether that’s digital assets or it’s fintech and it intersects with financial services. And they come in with these very bold ideas, at least partly because they are unfettered by a background in financial services, and they don’t know what they don’t know. as a general sort of comment about a lot of ⁓ tech startups ⁓ that I’ve sort of worked on, ⁓ who don’t have somebody in their business with financial services background. ⁓ they have bold ideas because they they don’t know what the limits are.
speaker-1: Yeah. Can you give some examples as to the types of innovations? For those listening at home, when we talk about financial in innovation in fintech, it seems quite far fetched. Are there any fintechs that the everyday Australian might be able to recognise as an innovative company that has changed the financial layout of ⁓
speaker-0: ⁓ yeah, so I I think ⁓ Raise is one that is probably reasonably well known. ⁓ so they were the original Roundup app. ⁓ so ⁓ you link your Raise app to your bank accounts, ⁓ and then when you spend, whatever you spend gets rounded up to the nearest dollar. And that difference between what you spent and the nearest dollar gets invested in ETFs. ⁓ so it’s a way that ⁓ your everyday consumer can invest their spare change ⁓ in the stock market, right? ⁓ and in exchange traded funds. So they’re immediately diversified because they have their own portfolios. So it’s a little bit like logging into your superannuation and looking at your portfolios and your super, except this is ETFs that are traded on the stock market. ⁓ I don’t know how well known they are, but they come out of the US ⁓ and sort of talking about I use them, I love them. They’re sort of talking about founders and and thinking about regulation. I think ⁓ a month before RAISE actually launched in Australia, I spoke to I think they were a university student out of Melbourne who’d had an idea to do something like this and they had spent, I don’t know, a year doing the tech stack. And then I told them it was a registered managed investment scheme and it takes one to two years to get that license, or otherwise you’ve got to partner with somebody and they won’t do it if they don’t know who you are. And then a month later Ray’s launched.
speaker-1: Interesting. And so I I guess when when you think about those sort of and now we’ve got multiple fintechs in in Australia, it’s quite the environment for building f financially financial innovation companies and platforms and software and services. But is there something are there any risks that you’ve seen n that weren’t quite on the radar for some of these Australian companies originally. What were the potholes that they tripped over?
speaker-0: ⁓ the big one is definitely ⁓ having a startup with a founder and nobody in the business who knows anything about financial services. So it’s great that people are having innovative i ideas that is out of the box thinking because they’re not sort of constrained by knowing what the current limits are. and you want to have innovative ideas and then maybe see if you can find ways to work around regulation. But the biggest pitfall I see from that is that people don’t realize how far in advance they have to engage with legal. they do sometimes like dismiss it as, ⁓ well regulation will just solve that problem we get there. It’s like, okay, but you’ve done three years investment into your tech stack and then you go to speak to a lawyer because now you’re ready to launch and you’ve got plans to launch in three months and they tell you that your time horizon to launch from a legal perspective is one to two years. ⁓ what do you do now? ⁓ and and even if you are not sort of on a critical pathway to launch, right, the the loss of competitive advantage in having to delay like that. And if you can work around licensing, some some some things you can work around, right? But some things, registered management investment schemes, you you can never work around that one. ⁓ so you’ve got to find someone to partner with you because they don’t know who you are and you don’t have a reputable background, they’re not gonna do that. But also you’ve got to have a certain amount of funds under management before they’ll entertain it. Yeah. ⁓ so yeah, that not not knowing how far in advance they sort of have to think about their legals and just thinking that we’ll just solve it when we get there, it’s not always that easy and the timelines can be quite inflexible.
speaker-1: And so that sounds like a bit of well the compliance and the legal is ⁓ s a friction.
speaker-0: Yeah, friction, secondary. ⁓ we don’t want to think about that, it’s not important. Don’t let the legals constrain your thinking. I I’ve heard that.
speaker-1: And so what are the consequences then? Let’s just multiply just one of those startups that require that education and that embedding of compliance and legal into their product and service. When that’s overlooked, ⁓ which it sounds like it happens majority of the time by excited ⁓ inventors, I guess. But if you multiply that, what’s the consequence for Australia? Because it sounds like there’s missed opportunities there for us. ⁓ because perhaps there’s a delay, maybe an international business might come in that’s a bit bigger, a bit better.
speaker-0: Business ideas that are never actualized, or business ideas that ⁓ then are late to market, ⁓ lose the competitive advantage. Yeah, maybe an overseas business doing something similar comes in and you know, they get the first mover advantage and you’ve missed out. I’m sure there’s an economic cost to that. ⁓ I couldn’t begin to know how to quantify it, but I’m sure there is one. ⁓ there’s also a personal cost, right? Like people who have dreams that might have changed their lives if only they had known. And and often these people come in, n it’s not just ignorance of legal, right? They don’t know anything about like how to get ⁓ capital, right? They they don’t know how to find investors, they they don’t know anything about like what are seed investors, what are angel investors, like they don’t know what those things are. ⁓ they find out how much the legals are going to cost because some of this stuff is very expensive. ⁓ you know, we can try to be cost effective as much as we like for startups and we frequently are. ⁓ but really you’re talking about deferring costs or changing impact on cash flow. Or doing shortcuts until there are no more shortcuts. ⁓ so telling people the answers, right, as opposed to giving them a formal legal opinion. If you don’t need someone to see your formal or legal opinion, I’ll just tell you what you need to do. Come back to me when you need the formal legal opinion to show to somebody and we’ll do it then makes it cheaper, right? But if you want to set up a structure like a regulated managed investment scheme, and there are no shortcuts at that point. So yeah, like it’s ⁓ the impact on those people individually as well, like the loss of their dream, ⁓ a dream that might have changed their life, like financially, if they’d gotten it off the ground. ⁓ how that might have changed the lives of other Australians that they might have taken along with them for the ride. So, you know, other investors or, you know, ⁓ employees who come on like early in the journey and who get to be part of that. ⁓ so yeah, all of that is lost ⁓ when people don’t know enough to pull the right levers at the right time.
speaker-1: I think it’s really hard to run a business in Australia. Actually, I know it’s really hard. For any industry vertical, any industry is ⁓ it’s hard. We’ve got a lot of we’ve got the tax to think about, compliance to think about, company structures. ⁓ it’s complicated and it’s it’s quite expensive to do. So w we’ve got ⁓ we do have a relatively
speaker-0: So it’s
speaker-1: We’ve got a wealthy, robust financial system, ⁓ country and financial system. We’re set up to succeed, is is how I view it. The government ⁓ often comes out with ⁓ reforms, legislation. Have you engaged much with the government on reforms, ⁓ for the betterment of the Australians?
speaker-0: Look, we try to. ⁓ we consulted very heavily for digital assets. ⁓ we’ve also consulted a lot for ⁓ payment reforms ⁓ and we did some work on buy now pay later. ⁓ I guess buying our pay later is a really good example of where I feel like regulation has maybe failed us. ⁓ obviously for digital assets we don’t know yet. We’re waiting to see, right? ⁓ but buy now pay later, ⁓ we had low cost credit, people were able to sort of buy things and repay it in four instalments. ⁓ and then they decided that that should be brought into consumer credit regulation, which meant responsible lending. ⁓ I’m very pro-regulation, ⁓ but I did actually go to the Senate inquiry and testify for that one to say that I was opposed to those changes. And one of the reasons is because I believe that that regulation will probably ultimately be the death of binar pay later, ⁓ in the sense that I think that binaro pay later products will become increasingly indistinguishable from other forms of credit, like credit cards. in fact, a lot of binarous Pay Ladder providers have had to switch to a structure which is a much closer to a credit card, so that they don’t have to do responsible lending every time someone wants to pay for their toaster in four instalments. ⁓ and that was kind of the point that I made, and I know that ⁓ one of the industry associations made it as well. ⁓ the research shows that something like I forget the number exactly, 90% of these transactions are around the $100 mark. ⁓ so why are we imposing onerous regulation to check that people can afford these loans. ⁓ Mostly they’re not they’re just sort of concern, right? I I felt that there should have been thresholds imposed. So, you know, for buying our palette under a certain threshold, it just continues as is, or maybe with very light touch. They haven’t done that. They’ve they’ve brought it wholly into the regime. ⁓ So I mean that that’s unfortunately an example of where sort of failed. But I think it makes your point, right? That ⁓ regulation, I am pro regulation because I do believe in consumer protection. But I do also think you’ve got to strike that right balance. And when you fail to strike that balance, ⁓ there can be consequences. And I know from working with some by now pale data providers that they are struggling with those consequences and whether they’ll be able to solve them.
speaker-1: I remember when Buy Now Pay Later came out and I think it’s the digital version of Lay Buy. Yeah. And when w I know I mean I saw it as an an opportunity. I I remember myself growing up, my mum would get our Christmas presents on Lay By from June to make sure that we would have something on Christmas Day. And I thought, well, of course this is going to be the future. but yeah, there’s been a little bit of ⁓ friction around Order for a pay by now buy now payloader. So that’s ⁓ it’s been interesting to watch actually. So the regulatory environment directly impacts on Australians having that confidence ⁓ around the framework that they’re building within. And I think in there’s some payments reforms coming, digital asset reforms, even ⁓ some AI guidance is is coming out to assist Australians in navigating, you know, how they use some of these technologies. If we were going to get it dreadfully wrong though, if we when it comes to regulation, what what would be a red flag that you might see? And this wasn’t one of the questions, but I’m really curious to hear, is there something on the horizon that you might have seen, haven’t articulated or shared that you think we could dodge?
speaker-0: Look, I’m not sort of aware of anything beyond where we’re at at the moment. I haven’t really had the opportunity to stick my head up above the parapet sort of think about that. I do think AI is probably of of concern, ⁓ if you want to put me on the spot. Yeah. ⁓ and I know that we have some AI guidance coming. but I think that there’s probably a lot more that will need to be done in the AI space. there there’s a lot of sort of I don’t even know if it’s anecdotal or if it’s research at the moment, but I’ve sort of been reading things about How younger generations are starting to rely on AI and not use critical thinking skills. ⁓ I mean we’ve seen ⁓ instances of lawyers being prosecuted for misconduct because they’ve used it and they’ve the AI has hallucinated cases. In fact I found out recently there’s a whole website that tracks all the AI hallucinations in legal cases. Wow. ⁓ and there’s a lot more in Australia than people realise. ⁓ So it’s it’s like why why are we why are we doing this? We all had critical thinking skills. Why have we suddenly turned them off? And I was actually just talking to another lawyer yesterday. I said, I don’t understand why lawyers are falling into this pitfall, because we already review our juniors work. What is the difference? Yeah. Right? Whether it’s handed to you by a junior staff member or whether it’s handed to you by an AI tool, why are you not reviewing it the same way with the same critical lens? And I don’t understand, but there seems to be something about AI which is w w the way we engage with it. Yeah. ⁓ seems to be problematic. and I think that there’s the potential for AI guidance and AI regulation. ⁓ I think I saw last week that ⁓ there was a ruling from one of the film academies. I don’t know if it was the actual Academy Awards or one of the others, ⁓ s making some rulings about ⁓ the use of AI. ⁓ so a a a an actor has to have substantively performed a role, it can’t have been done by AI. A script has to be substantively written by a person, it can’t have been created by AI. I think there’ll be a lot of that. ⁓ a lot of putting boundaries around what AI can and can’t be used. ⁓
speaker-1: Yeah. Four?
speaker-0: And I expect that that’ll have implications for financial services as well and digital assets because obviously it’s starting to be embedded everywhere.
speaker-1: It is. And that’s ⁓ that’s leading into my next question, which is around some of those intersections of technologies, including and I’m I’m not sure if you’ve seen it yet in your practice, ⁓ but the regulation around agents or AI financial payments automated or autonomous AI agents. Have you seen anything like that?
speaker-0: Look, I have not been asked to look at something like that, but I have given it some thought. ⁓ a long, long, long time ago, like back in the the naughs probably when I was still only a baby lawyer, ⁓ I had a client who was sort of asking me to look at obviously not agentic AI or anything like that, but chatbots and and who’s giving the financial advice if a chatbot is is actually providing financial advice and stuff like that. ⁓ there’s a manned chatbot, obviously not an AI one. ⁓ and so there’s all these questions about, well, you know, like ⁓ Is it the entity whose name is on If it’s outsourced, is it the call center? ⁓ and so you have to sort of think through things like that. Who is providing the financial service? And I think it’ll be the same thing with these AI agents. Who is providing the financial service, right? Is it the business that has deployed them? Is it the business that built them? Is it somebody in the middle who programmed them? Is it all of them? I don’t have answers to those questions yet. But Well we’re we’re working on it. What I can extrapolate from that is We look at a lot of technology in the payment sector, right? Because you have software as a service, and then you have instances where software is like sold and downloaded and used. And there are definitely different implications for financial services from those things. Yeah. ⁓ and in general, don’t hold me to this, but as a as a blanket sort of statement that I can make, it is usually the case that if you offer software as a service, the software provider is providing the financial service. ⁓ and if it is downloaded, you’re just providing piece of technology and then the person who downloads it and installs it on their computer and uses it is the one providing the financial service. This is also the same for like ⁓ trading software and things like that, right? So if I produce a trading piece of trading software and I allow users to download it and all they’ve done is they use it for their trading purposes. I’m not providing them a financial service. But if I provide a platform that is plugged into various things and it’s hosted in the cloud and they come to my platform to access it, it’s more likely that I’m providing a financial service. So that same thinking is going to come across to AI agents in terms of thinking about like who’s providing the financial service. It can’t be the AI, that’s not a person, right? It’s gotta be somebody else. But that is definitely something that we’re gonna have to track through in financial services where people are talking to AI agents and not actual real people. And then what what compliance controls do you put on that as well?
speaker-1: It’s unknown. ⁓ people are just building, ⁓ and I what I’ll even willy nilly, they’re building willy nilly these ⁓ products and services, these ⁓ AI agents who are trading for them, ⁓ accessing all A APIs. They can all of that yeah, and and so they’re the agents are obviously making their own decisions within the parameters that
speaker-0: Accounts, their trading accounts, yeah, all of that stuff.
speaker-1: that it they’re set to. It seems like a real opportunity or necessity to start engaging as soon as possible with the government on some of the guardprows. ⁓ you’ve engaged with government, you’ve engaged with regulators. It’s part of what you do. You’re always in those rooms. What does that look like? ⁓ how does is that how does the change happen?
speaker-0: ⁓ look, that’s a really hard question. If I sort of think back to like how it happened with digital assets, ⁓ I mean I’m not necessarily in all the same rooms for for AI, but I probably will be for when we’re talking specifically about AI and financial services. It’s the conferences that you go to and the people that you know and the conversations that you’re having with the people that you know in other contexts. ⁓ right. So we’re frequently talking to ASIC because we’re talking to them for clients. ⁓ and so sometimes those conversations are opening things. So we were talking to ASIC about stable coins about two, two and a half years ago was the first time that we actually started talking to them about the situation that I guess you could say has led to where we are now with stablecoin relief, right? So I think it was there was a round table and ASIC was present and we were talking about stable coins. And I think I said something to the effect of, but if you take the view that this is a regulated financial product and Everybody has been providing regulated financial services for 10 years. You create a climate where nobody is willing to move, right? Nobody wants to come and talk to you because there’s litigation right now. Nobody wants to apply for a license because they might make it an admission. And nobody wants to delist the token because what messages it sends to the market. So that was that was kind of like the first point at which we started talking about this problem. And I think that that’s part of why we got where we are with stablecoin relief, because it helps everyone to transition into a licensed environment. In a compliant fashion and avoids everybody trying to hide what they were doing, avoids market events because people are delisting products they think are problematic. ⁓ but but that’s sort of where it starts sometimes, is in in roundtables and conferences and conversations that you’re having with regulators for clients where ⁓ you’re sort of getting feedback from the regulator about certain things and you’re like, but hang on a second, have you considered X? Right? ⁓ that obviously evolved because it wasn’t just I mean there’s two parts to digital assets. There’s ASIC’s views on how chapter seven as it is applies. And then also there were the reforms, right? So we’re kind of having two conversations at once. Largely the one that we were having with ASIC was about chapter seven. ⁓ but then the reforms act. Sorry, yes, chapter seven of the corporations act as it applies right now. ⁓ and then for the new reforms, that was Treasury. ⁓ so i y you see all these people again at the the same the same conferences, the same events. and if you
speaker-1: The corporations are the corporations.
speaker-0: engage intelligently, you’ll be invited to participate more. ⁓ so not just in those public forums, but also one on one. ⁓ so if people know that they can get sensible, reasonable, balanced views, ⁓ you’ll be asked to provide your thoughts on certain things and use as a testing ground. ⁓ so yeah, that I guess that’s how how it happens, yeah.
speaker-1: Yeah. Yeah, and it sounds like a meeting of the minds or a brain’s trust. I I’ve seen that form ⁓ across the digital economy actually when and there’s multiple different regulators and departments who now come to participants and industry stakeholders and leaders and ⁓ associations like ours, ⁓ to to really understand the what’s happening within the business? Like what’s the consequence of these rules that we’re drafting for you? Yeah, they gonna How is that gonna impact on your business? Is it gonna cost
speaker-0: To know.
speaker-1: you five million dollars. Are you going to be able to afford that? Are you going to be able to hire the right people to be able to function as a business?
speaker-0: How do even do the thing we’re asking you to do inside the environment within which you operate?
speaker-1: That’s right. And th those are really critical because it is really hard to run a business in Australia. So having all of these burdens or requirements on you as as a business owner, ⁓ is is pretty hard to carry sometimes. So those conversations with the regulators are really important. What are the positive consequences to those relationships? Like what do you think that what are the impacts for the rest of Australia and and businesses if the right people are in the right rooms sharing the same sort of message.
speaker-0: You hopefully what you get is laws that are a bit more reasonable, that balance consumer protection with businesses being able to operate, which don’t create ⁓ a situation in which people are are more likely to go offshore. And when I say people offshore, that can be businesses or consumers, right? Because if you make it hard for businesses to operate here and no one does operate here, they’ll go offshore but then consumers will follow them, right? And so then consumer protection has failed. Because your consumers are now dealing with a business operating out of
speaker-1: Yeah. Show business.
speaker-0: Yeah, you know, Gibraltar or somewhere like that. but also if you create a situation where businesses can operate but maybe they can’t compete, you can still have the same thing. Businesses are still here, but consumers go offshore because it’s cheaper, or there are more services that are more accessible, ⁓ or they can get things that they just can’t get here. so I think that that’s hopefully the outcome of having the right people in the right rooms is that you strike a balance between consumer protection and business outcomes. Because you want both of those things to work. If you get it wrong, neither of them works. You you failed everybody, you failed the consumers and you failed the businesses. and this is also why I tell my clients frequently: like when there’s consultation on, yes, I will do a submission, but it’s also really important that you do a submission, right? I can tell Treasury and ASIC what I think is legally reasonable. I can tell them how I think it fits in with the existing law, I can tell them if I think it creates regulatory arbitrage. Or it’s inconsistent or it’s not fair or it’s not level, all that sort of stuff in terms of how the law works. I can’t tell them what you can do as a business. Right. Like I’m not that deeply embedded in how your business functions to know when you can and can’t do certain things. ⁓ I will learn some things along the way because my clients will tell me when I’m talking to them. They say, ⁓ this requirement is ridiculous. Like we actually can’t do that. Like the way that our platform works, it’s just not possible. ⁓ And then I can talk to that in future. But I don’t know all the other ones. Right? Like I I need clients to talk to that stuff. Like what what is actually an impediment for you doing business? ‘Cause I can only talk from the perspective of what does a reasonable, rational legal system look like in this sector?
speaker-1: It’s interesting because we had a conversation with ⁓ Hugh Hardigan on the podcast and he talked about providing real case studies. Like this is how my business operates. Yep. And and also providing solutions to the government and making it really easy for them to get it right. then there’s there’s two there’s two camps at the moment. There’s the camp that says Australia is too overregulated, we’ve got too ⁓ too much red tape, it’s hard to innovate. And then there’s the other side who say we love how much regulation we have. It provides a lot of clarity. International businesses have the freedom to come in and now know for certain that this is how we can function in Australia and these are all the licenses we can have. Have you seen that ⁓ disparity between the two sides? Do you have a view on that?
speaker-0: I look, yes, I would have met people who’ve said both of those things. ⁓ I’m sure I have clients who believe both of those things. ⁓ it doesn’t always come up, but sometimes there’ll be a throwaway comment when we’re, you know, that’s discussing a piece of advice or taking a brief. probably not views that I’ve deeply explored with a lot of people. ⁓ but I guess what you can look at as a microcosm is the digital assets industry and how it has talked about regulatory change, right? And you could see those two camps inside the digital asset space as we’ve been on this journey. ⁓ So a few years ago when Senator Bragg first introduced his bill, and there there were people who are like, no, no, no, this is like this is the wrong regulation. We want regulation inside chapter 7 of Corporations Act. ⁓ Then there were people who were saying no, we don’t want any regulation, we don’t think we need it, we can self-regulate. Then there were people saying, look, it might not be the perfect regulation, but we want some regulation, just give us regulation. We want certainty, right? and you can track that evolution all the way from the introduction of that bill through to where we are now. and there are still people who are saying right now, look, I don’t know that the current regulation is the right one, but this is what we’ve got and we can’t afford to delay any longer. So I guess we’ll go with this because we want certainty. Yeah. ⁓ and so I think a lot of people have landed there in terms of wanting the certainty. Whether they do or they don’t like where we’re at, ⁓ whether they think we needed a regulation or not. They’re now at the point where maybe it’s through exhaustion.
speaker-1: Yeah, I was gonna say You get what you get, you don’t get upset.
speaker-0: J just give me the certainty. I mean, you can be upset, but it’s not gonna change it. Yeah. and last year definitely ⁓ was a very quiet time in the digital assets space. ⁓ none of my digital assets clients were really talking to me about things. And when we were talking to them, it was more about ⁓ what’s happening with regulation, what’s happening with reform. ⁓ hey, we thought there was a new judgment handed down. Can we get an update on what that means for us? Do we need to pull another product? ⁓ but it was a very conservative attitude, right? Nobody was doing anything new. And people were very frankly saying to us, We have stopped trying to launch new things because it’s too risky right now. Pause, huge pause. And it’s just unpaused this year.
speaker-1: Yeah. Huge pause.
speaker-0: ⁓ end of last year we saw a flurry of stuff around stable coins, obviously, because and and other people trying to get in before the no action relief dates and all that sort of stuff. ⁓ but ⁓ this year it’s just totally taken off. ⁓ and it’s the certainty. Yeah. So I guess what that proves is you can say whatever you like about whether it’s over regulated, under regulated, too much red tape, or creates structure. ⁓ what the market is telling me right now is we love the certainty. ⁓ because you can work with certainty. Right. And maybe it might put some limits on some things you can do and maybe you can’t do things in the way that you wanted to be able to do them. But you know what you can do and you’ll do the things that you know that you can do.
speaker-1: Yeah. And I think there’s an evolution as well to I mean, this is step one from what I’ve seen. Look, it took ten years when we’re talking about ⁓ the reforms to the Corps Act and we’re talking about digital asset regulation, ⁓ payments ⁓ reform. We’re we’re talking decades. Yeah, absolutely. And so I think perhaps it it could be a combination of the time it takes. to to regulate ⁓ the exhaustion that we talked about. ⁓ and then obviously we we finally see it and we’re we’re okay with it as it sits right now. But there’s also an opportunity, we’ve got another decade to see h all the products that are launched because of this confidence and then the work around Okay, we’re gonna have to amend this because we didn’t actually foresee this particular product and service launching all these AI enabled agents that are able to interact with your refrigerator and then go make a payment on your on the exchange and and ⁓ and also go and ⁓ turn the lights off at your house and all that sort of stuff. So no one was no one has has factored in some of the changes that we’re we’re about to see.
speaker-0: Or we did foresee it, but we knew we couldn’t get that path past right now. So we should have let it go, right, to get something.
speaker-1: Yeah, and look as you say, some of your ⁓ clients and and some members of ours are already and have been pointing out there’s there are some gaps. There are some oversized sales businesses Yeah, well there’s DeFi is about to I think get jump under the microscope ⁓ shortly and I think it’s about time. but if we’re gonna look into the future, let’s say Let’s say a couple of years, I would usually go ten, but we’re in a pretty quickly evolving space here. What would you say you can confidently you’d walk into a room and go, Australia did this really well at this particular time a few years ago and this is where we’re at.
speaker-0: ⁓ that’s ⁓ Look, I do think that where we’ve sort of landed for stable coins, ⁓ in the Treasury reforms is a good place to be. ⁓ sort of treating them as another form of stored value product. ⁓ they always kind of looked a bit like a stored value product, but they were outside APRA’s remit because of technicalities and the definition in in the relevant act. I d I don’t think treating a stable coin as a non-cash payment facility in and of itself is the right conclusion. But that’s obviously a temporary state that we have, and we have a whole bunch of relief that basically means that that characterization won’t matter meaningfully to people. as as we transition towards this outcome where there’s a facility within which the stable coin operates. ⁓ and that facility is a financial product, but the stable coin is not. And so you can truly fra freely trade the stablecoin. on markets with no financial services implications and it’s only at the point of of minting or redemption that it becomes a financial service. And I think that that’s right, because it’s more like digital money. ⁓ It puts it a bit more in line with what’s happening overseas where some jurisdictions are treating stable coins like e-money. ⁓ It’s more in line with how we treat digital dollars in a bank account, right? We don’t say that the moving of a digital dollar in a bank account is
speaker-1: Yeah.
speaker-0: A financial product, right? It’s it’s not, it’s just a representation of a dollar and a stable coin should be the same. And so I feel like where we’ve landed with that as the treasury reforms are right now, bearing in mind they haven’t been passed, I think that’s a good outcome because it represents the movement of representations of money onto the blockchain in a frictionless way, with still some consumer protections.
speaker-1: Yeah. What does a stablecoin mean for Australia? I I I there’s now some clarity around what that’s going to look like for our stablecoin issuers. But for everyday Australians, what does having a regulated stable coin mean for them? How does it impact their lives?
speaker-0: That’s a really good question. ⁓ I don’t know that I necessarily have an answer to that, but I also think that we are in a state where there’s going to be tremendous amounts of changes, right? So what I can say is I have seen lots of people already coming to me this year talking about trying to put what you would consider to be traditional financial products on the blockchain. n something people have been talking about for a little while, but no one wanted to do because they had no certainty around AFS licensing. now that they have that certainty, there’s th this rush. We we want to put financial products on the blockchain. It was inevitable. We also want to put real world assets on the blockchain. Right. The more of that stuff that we have on the blockchain, the more likely it is that consumers are going to interact with the blockchain. Whereas at the moment it’s not exactly ubiquitous. ⁓ a lot of consumers, if you were to just walk up to a random person in the street and ask them if they know what the blockchain is, probably more likely they wouldn’t know. So the more of these sorts of things that consumers are using are on the blockchain, the more likely they are to have exposure to the blockchain, the more likely they may need stable coins. ⁓ I’m not across all of the use cases for stable coins. I know that there are definitely some ⁓ exciting ideas around using stable coins for settlements for traditional markets to eliminate the T plus two, because there’s a push in a lot of jurisdictions to reduce that to T plus one or even T plus zero, ⁓ which you can’t sort of achieve in normal money markets. ⁓ we may see consumers using stable coins potentially for some of those things. ⁓ we may see them using them for other things on the blockchain where they want to access other real-world goods. stable coins as a monetary unit, ⁓ I mean we we say stable coin is a question of what stablecoin will mean in the future as well, right? Because some of we’ll also use stable coins to mean pegged to an asset ⁓ in that sense. So ⁓ if we sort of move away from just your fiat currency stable coins and move to other sorts of stable coins that maybe aren’t fluctuating in value. The blockchain definitely lends itself ⁓ as a ledger. ⁓ so for record keeping systems, ⁓ could we see the land titles office move on to the blockchain in the future?
speaker-1: Feels inevitable.
speaker-0: It feels inevitable, doesn’t it? It does feel inevitable. I also aware that the blockchain has been used for things like ch tracing ⁓ the provenance of like ⁓ hydrogen, so green hydrogen ⁓ versus dirty hydrogen. ⁓ so it’s it its usage is for record keeping and ledger, you know, arguably surpass a lot of other potential usages. ⁓ but putting the land titles off was on the blockchain is a place where a consumer could potentially come into contact with it. And I don’t know what sort of token you’d use for that, but it would arguably be some kind of stablecoin depending upon what it was or how it functioned. so I don’t think consumers probably really have much intersection with stable coins right now. I think mostly they’re being used more by businesses, ⁓ even though they’re retail offerings. Also, ⁓ investors on the blockchain, stable coins get used a lot to sort of hedge portfolios and to provide them with the cash component, right? So if you talk about any investment strategy and you have like your cash component or your
speaker-1: Yeah.
speaker-0: conservative component, stable coins are filling that function. ⁓ but I think that where they’re gonna go in the future will be further than that. But it’s it’s hard it’s hard to envisage.
speaker-1: Yeah. It is hard to envision. I might my closing question was about the future or what you see and I’ve already asked that, but what I really wanna ask to close is h w what is something exciting that you’ve seen in financial technology and innovation that you’re pumped about because you know it’s gonna change the world. as soon as it proliferates ⁓ across the Australian economy economy or even globally.
speaker-0: Look, I ⁓ a particular use case that I have been quite passionate about because I’ve been trying to help people with this one for about five or six years now, and couldn’t because of uncertainty around AFS licensing, also markets licensing will still remain an issue for this one. ⁓ but the potential to take ⁓ illiquid investments and put them on the blockchain and make them liquid. and that
speaker-1: Real estate?
speaker-0: ⁓ horse racing syndicates. ⁓ right. Right. Is is is the first one I started work on. It doesn’t sound like a kind of an important thing. Like the horse racing syndicate itself, it’s not, but the the the ability to create liquidity is. But ⁓ it started with horse racing syndicates because they are a consumer product often, right? These are they are they are an a regulated managed investment scheme, but there are exemptions, so that means that they’re not as highly regulated as other managed investment schemes. They are sold to consumers, ⁓ people who buy a tenth or a twentieth of a racehorse. ⁓ in the hopes that they’ll make some money out of the gambling winds. But once you’re in, it’s very hard to get out, right? Because it’s for the lifetime of the horse, the the racing career or the the breeding career of the horse. you take something like that and you put it on the blockchain, you make it tradable. Yeah. Really easily tradable. And if you put all of the horse racing horse racing syndicates on the blockchain, you potentially create enough liquidity, even if it’s not locally, it could be globally, if you had to. ⁓ to make those things liquid. So then people can get in and out of them. ⁓ and illiquidity is definitely an issue for some of these consumer products because it’s okay to sort of lock wholesale investors into long term illiquid investments because they are more sophisticated than what they’re getting into. You lock a consumer into an investment and then they can’t get out of it and then maybe their circumstances change and they need that money back. That’s a problem. So I think the ability to create liquidity in
speaker-1: Yeah.
speaker-0: previously illiquid investments ⁓ is very exciting. I have seen people talking to me about other use cases. So yes, wholesale investments like debentures, notes, convertible notes, things like that, ⁓ where typically you’re in for the term, whatever it is, maturity, five years. Yeah. Making those things liquid, making those things accessible to retail investors, right? Because you create liquidity, you can potentially make them accessible to retail investors. So raising capital for large companies via a notes issue Where everybody can buy a dollar token, right? And so human investment becomes a dollar. Yeah. Now these things are highly regulated. I’m not gonna say that from a legal perspective, launching those things are easy. I’m not. They’re all highly regulated. You’re talking registered managed investment schemes, markets licenses and dementia issues to retail investors. We park the legal side. We can solve that. Right. Like the ability for the blockchain to change what investments are available to consumers and what they can get in and out of easily, I think is ⁓ quite significant and enough people have been talking to me about this one for long enough now that I think it will happen. ⁓ it’s just a question of when.
speaker-1: It sounds like people want to build. They just want the clarity around all those licenses that you just parked. So they shouldn’t need to be unparked.
speaker-0: They need to be unparked. They do need to be unparked. But we have some more clarity now. Yeah. ⁓ I think that the markets license is still a bit of an issue. ⁓ I know that at least one exchange has applied for that license. I’m not sure how many others will follow. ⁓ and I’m certainly talking to people who want to do tokenize custody platforms under the new regime. So putting real world assets on the blockchain. And where those real world assets are financial products, yeah, the markets licensing is a problem. Right, which is the same with Easter benches and horse racing syndicates. So I am a little bit concerned about that because if you put these things on the blockchain and they can’t be traded, what’s the point? Right. Like it just won’t it won’t go anywhere. ⁓ so we’ll have to remain to be seen how many exchanges apply for that license. ⁓ but yeah, we can start to solve some of those problems. Yeah. ⁓ and and we’re starting to see more cross digital asset trad fire partnerships. ⁓ where people who are in the digital asset space are going, Hey, you know, like we can do these things and they’re talking to Tradfire people and they’re like, Yeah, we wanna put our stuff on the blockchain. All right. Whereas previously people were very much, Well, no, you’re over there and we’re over here and never the twin shall meet. ⁓ so I think that there’s big evolution of thinking happening there.
speaker-1: There is, there’s a there’s a marriage of sorts taking place at the moment. There’s a bit of consolidation, bit of interest. yeah, Tradfire interest coming in. It’s pretty exciting. Well thank you so much for coming on the show, Jamie. It’s a pleasure to have you.
speaker-0: Yeah, thank you very much. It was ⁓ lovely to share those thoughts.
speaker-1: Digital, where policy meets innovation. Stay curious, stay inspired, and be part of the movement Building Australia’s Next Economy. The future is happening now. See you in the next episode.