In its submission to the consultation on verifiable credentials policy, the SMSFA and the Financial Advice Association of Australia said the framework should provide sufficient flexibility to accommodate emerging technology while ensuring appropriate safeguards for privacy, identity protection and fraud prevention, and should avoid unnecessary duplication with existing legislative regimes.
“Verifiable credentials (VCs) have the potential to deliver significant benefits, including greater trust, enhanced privacy control and improved portability of information. However, these benefits will only be realised if VC development and use are supported by a robust and trusted framework,” the association said.
“It is therefore important that a Commonwealth VC Trust Framework is established to provide confidence, consistency and clear expectations across the ecosystem.”
The submission said that increased adoption of VCs has the potential to improve efficiency and productivity for both government and business by reducing administration costs, improving service delivery and, importantly, reducing the risk of fraud and data breaches.
“VCs can also support professionals to comply with their statutory obligations. For example, our members, as professional advisers and service providers to the community, are likely to increasingly rely on the VC Trust Framework as it matures to verify client identity, the identity and credentials of personnel in AML/CTF roles to meet personnel due diligence obligations; and the authenticity of the qualifications purportedly completed by financial advisers to ensure they meet the legislated education standard, as part of the job application process.”
However, it said that while VCs have the ability to enhance economic efficiency and improve productivity, careful consideration must also be given to the safeguards required to protect both individuals and businesses.
“This is particularly important given AUSTRAC’s recent updated risk snapshot of Australia’s financial crime landscape, which found that criminals are increasingly using AI to facilitate illicit activity, including fabricating identities,” it said.
“We understand that the proposed VC Trust Framework is intended to operate as guidance only, reflecting that VCs are a relatively new and emerging technology and that best practice will continue to evolve. While we recognise the importance of flexibility, a guidance-only approach risks undermining a core objective of the framework: building trust and confidence in the system.”
It continued that while the Digital ID and Verifiable Credentials Strategy was developed jointly by the Commonwealth, State and Territory governments, its success will depend on those jurisdictions adopting and applying the VC Trust Framework in a consistent way.
“Consistent adoption would help support interoperability across Commonwealth, State and Territory agencies as issuers of VCs. However, this outcome depends on the national strategy being implemented effectively, particularly noting that State-based credentials, such as drivers’ licences, fall outside the scope of the proposed VC Trust Framework,” it said.
“If interoperability is not achieved, verifiers and holders of VCs may be required to navigate different systems and processes at both the State/Territory and Commonwealth levels, reducing the efficiency and trust benefits the framework is intended to deliver.”
It added that interoperability is critical for ensuring the system delivers efficiency, cyber security and compliance gains for consumers, businesses and government.
“This will help drive broad investment in the system from across the ecosystem, which is essential for controlling costs and improving affordability, particularly for small businesses.
The consultation paper notes that a number of existing Australian laws provide protections for, and impose obligations on, people, businesses and organisations that issue, use and rely on VCs, including the Privacy Act 1988 (Privacy Act),” it added.
