Labor shadow treasurer Jim Chalmers slammed Treasurer Josh Frydenberg for spruiking reforms which would occur after the federal election next year.

"Nothing Josh Frydenberg says today will happen before the election," Dr Chalmers said.

"This is just a commitment to consult on the government's last consultation."

Mr Frydenberg announced the federal government would seek to implement sweeping changes to Australia's financial system, in a bid to digitise the payments architecture which would include the domestic regulation of cryptocurrencies.

Both the Australian Finance Industry Association and the Australian Banking Association have backed the proposed changes by the Treasurer.

"Nowhere is this digital disruption playing out faster than in the payments and crypto-asset sectors," Mr Frydenberg said in a speech to the Australian-Israel Chamber of Commerce on Wednesday.

"Given the pace of change and those leading it, if we do not reform the current framework it will be Silicon Valley that determines the future of our payments system."

The reforms are based on the Farrell Review which found the financial payments system in Australia needed to be modernised as new services such as buy now, pay later and digital wallets fell outside current financial regulations.

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ABA chief executive Anna Bligh said Australia's payment system has not been properly updated in over two decades and needs to remain "fit for purpose", lamenting banks would assist the government with an infrastructure overhaul.

"As significant investors in the nation's payment infrastructure, Australian banks will work with the government to implement reforms that modernise payments infrastructure and ensure Australians continue to benefit from a dynamic, stable and secure system," Ms Bligh said.

Diane Tate, chief executive of AFIA flagged the reforms are needed to ensure Australia can benefit from a digitising economy which has regulation designed to support competition and innovation.

"We need to rethink the current rules, not just for new payments products, but for existing products - some of the rules are outdated today, let alone for use tomorrow," she said.

"Australia has the opportunity to be among the leading countries in the world in leveraging new payments technologies and building appropriate regulatory frameworks."

Mr Frydenberg in speech also laid out a plan for a centralised digital currency which would undergo consultation next year.

Dr Chalmers did note Labor does support updates the restructuring of the payments system to better incorporate digital payment technologies.

"We support, in principle, sensible measures that would protect consumers, ease pressures for small business, make the rules and regulations clear and support investment and innovation," he said.

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