Corporations (CS Facility Exemption) Instrument 2023/18

Overview

The Corporations (CS Facility Exemption) Instrument 2023/18 was enacted to provide a temporary exemption for specific clearing and settlement facilities involved in a central bank digital currency pilot project. This legislative instrument was introduced to address the need for regulatory flexibility during the pilot phase of the central bank digital currency (CBDC) project, which is administered by the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre. The instrument was made under subsection 820C(1) of the Corporations Act 2001 by the Australian Securities and Investments Commission (ASIC). The policy objective of this instrument is to facilitate innovation and experimentation within the financial sector by temporarily exempting certain clearing and settlement facilities from specific licensing requirements during the pilot project, while ensuring that appropriate oversight and reporting mechanisms are in place. The Corporations (CS Facility Exemption) Instrument 2023/18 exempts the use case platforms of Pilot Participants from certain provisions of the Corporations Act 2001, provided that these participants have opted in by submitting a written notice to ASIC and meet other specified conditions. The exemption applies only if the Pilot Participant has provided detailed information about the use case platform and its operations, and if it has entered into a participation agreement with the RBA. Conditions attached to the exemption include requirements for notifying new users about the exemption, reporting any material changes to ASIC, and providing a final report to ASIC upon the conclusion of the CBDC Pilot. This instrument aims to strike a balance between fostering innovation and maintaining regulatory safeguards during the pilot phase.

Scope and Application

The Corporations (CS Facility Exemption) Instrument 2023/18 applies to entities participating in the Central Bank Digital Currency (CBDC) Pilot Project, administered by the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre, as outlined in the Act. Specifically, it provides an exemption from certain licensing requirements under Part 7.3 of the Corporations Act 2001 for use case platforms operated by Pilot Participants, provided these participants have entered into a CBDC Pilot Participation Agreement with the RBA. The exemption is contingent on the Pilot Participant providing an Opt-In Notice to the Australian Securities and Investments Commission (ASIC) at least five business days before operating the use case platform in the CBDC Pilot. This notice must include detailed information about the Pilot Participant, the proposed use case platform, and a copy of the signed CBDC Pilot Participation Agreement. The exemption is subject to various conditions, including requirements to inform new users of the exemption, notify ASIC of any material changes to the platform operation, and assist ASIC and the RBA with their regulatory functions. Additionally, Pilot Participants must submit a report to ASIC detailing the platform's operation during the pilot. This instrument is applicable nationally across Australia and is repealed at the start of 1 August 2023, although it may be extended or modified through subordinate instruments. The instrument also specifies certain exclusions and thresholds, ensuring that the exemption applies only to those platforms strictly within the scope of the CBDC Pilot and those Pilot Participants who have opted in by providing the requisite Opt-In Notice to ASIC. The exemption does not extend to other clearing and settlement facilities or to any platform operations outside the terms of the CBDC Pilot Participation Agreement. Subordinate instruments may further refine or expand the application of this exemption, but as currently enacted, it provides a targeted regulatory relief for participating entities during the pilot phase of the CBDC project.

Key Provisions

The Corporations (CS Facility Exemption) Instrument 2023/18, made under the authority of the Corporations Act 2001, provides specific exemptions and requirements for certain facilities involved in a central bank digital currency (CBDC) pilot project. Section 5 of the instrument exempts the use case platforms of Pilot Participants from the provisions of Part 7.3 of the Corporations Act 2001, which relates to the licensing and operation of clearing and settlement facilities. However, this exemption is contingent on the Pilot Participant giving a written Opt-In Notice to the Australian Securities and Investments Commission (ASIC) at least five business days before operating the use case platform in the CBDC Pilot. This notice must include detailed information about the Pilot Participant, the proposed use case platform, and a copy of the CBDC Pilot Participation Agreement (section 6). The obligations imposed on Pilot Participants include providing written notices to new users about the exemption and the absence of a licence under Part 7.3 of the Act (section 7(1)). Pilot Participants must also inform ASIC of any material changes to the use case platform at least five business days before implementing them (section 7(2)). Additionally, they must notify ASIC in writing if they fail to comply with any conditions set out in the instrument (section 7(3)). They are also required to assist ASIC and the Reserve Bank of Australia (RBA) in accordance with sections 821C and 821D of the Act, as if they held an Australian CS facility licence (section 7(4)). Finally, Pilot Participants must submit a written report to ASIC within 30 days after the conclusion of the CBDC Pilot, detailing the operation of the use case platform (section 7(5)). Failure to comply with the conditions outlined in the instrument may result in various civil or criminal consequences. However, the specific penalties for breach are not detailed in the instrument itself. It is essential for Pilot Participants to adhere to the conditions to avoid any potential legal repercussions. The instrument is repealed at the start of 1 August 2023, as stated in section 8.