Australia is “stepping into the ring” with proposed sweeping crypto reform

The fintech and cryptocurrency community in Australia has welcomed the prospect of more regulation in the sector, saying it brings much-needed clarity, and plants a “flag in the ground” to show the direction legislation is moving in.

While it’s perhaps unusual for a sector to celebrate increased oversight, a murky regulatory framework has driven Aussie decentralised autonomous organisations (DAOs) to relocate offshore, and hampered the growth of others.

The Senate Select Committee on Financial Technology and Regulatory Technology, led by Senator Andrew Bragg, tabled its final report on Australia as a technology and financial sector yesterday, proposing a suite of reforms to regulation of the cryptocurrency and digital assets sector.

The report noted the speed of developments in the cryptocurrency and digital assets industry, and that Australian regulation has not been able to keep up. Already Australian-founded businesses are securing licences overseas and relocating, the report said.

The report tabled 12 recommendations, eight of which directly relate to rules around digital assets. Those recommendations are:

• Establishing a market licensing regime for digital currency exchanges;
• Establishing a custody or depository regime for digital assets;
• A ‘token-mapping’ exercise, conducted through Treasury, to determine the best way of characterising various digital asset tokens;
• Establishing a new company structure for DAOs;
• Clarifying anti-money laundering and counter-terrorism financing regulations to ensure they don’t undermine innovation;
• Making amendments to capital gains tax so digital asset transactions only create a tax event if they generate a clear gain or loss;
• Introducing a 10% tax discount to businesses undertaking digital asset mining, of they source their own renewable energy; and
• Undertaking a policy review into the viability of a central bank digital currency in Australia.

Speaking to SmartCompany, Caroline Bowler, chief executive of cryptocurrency exchange BTC Markets, says an additional layer of oversight is nothing to be afraid of.

These are businesses dealing with people’s money, and their hopes and dreams. That has to be taken seriously.

Regulation will by nature lead to best practices, she explains.

But a lack of regulatory clarity has been “one of the single biggest inhibitors” to BTC Markets’ growth.

There were things she and the team have wanted to do with the business that they haven’t been able to, simply because the regulatory framework didn’t allow for it. The fact that rules bespoke to crypto are on the table is “fantastic”, she adds.

These are only recommendations, and venture capitalist Mark Carnegie has some reservations around the actual adoption of change.

The pace of regulatory change and the pace at which the sector is evolving “are just poles apart”, he said in a statement.

Carnegie’s own DAO was “driven out of Australia”, and while a competitive market could draw businesses back, he’s not holding his breath.

“If we get legislation implemented and taxation certainty by the end of FY2021, I will host a party at Bondi Icebergs for everyone.”

Bowler, on the other hand, is feeling a little more confident.

The battle for legitimacy in the crypto space has been ongoing for 10 years or more. Even three years ago, recommendations like this would have been unheard of, she says.

She was pleasantly surprised at the speed of turnaround and the depth of the report, as well as the “prudent” recommendations.

The report has “put a flag in the ground”, signalling that this is what we’re working towards.

“We’re now stepping into the ring,” Bowler says.

“We have to stick to our word on this; we have to deliver.”