Government invites businesses to weigh in on the shape of crypto regulation in Australia

The Morrison government has opened the floor for submissions on its consultation paper outlining the shape of regulation for the country’s exploding crypto industry. 

A year after it launched a senate inquiry into the economic opportunities of growing the nation’s tech and financial sectors, the government says it’s hoping to move quickly to implement rules to govern digital payments.

In a joint media release, Treasurer Josh Frydenberg and Minister for Financial Services and Digital Economy Jane Hume said the government is seeking feedback on proposals and options to support minimum standards of conduct by crypto asset secondary service providers, along with safeguards for consumers.

Hume told a Blockchain Australia event on Monday the government wants to attract entrepreneurs to the country.

“We want to encourage innovation in crypto assets — innovation creates jobs and growth,” she said.

Treasurer Josh Frydenberg said cryptocurrencies and assets are a global phenomenon.

As more Australians invest in these new asset classes and embrace the new technologies underpinning them, “it is critical that we have a robust and competitive tax and regulatory regime in place”, Frydenberg said. 

“Tax certainty for investors and those transacting will also be vital.”

Australia seeking to attract crypto investment and growth

The request for industry and business submissions comes a year after Liberal Senator Andrew Bragg launched the Senate Select Committee inquiry to explore the size and scope of the opportunity for Australian consumers and business from Australia growing into a stronger technology and finance centre.

In November after the final report was released, Bragg, who chaired the committee, said he had “never seen an industry so keen for regulation”, adding he wanted to see the government accelerate the country’s embrace of the growing sector. 

“Almost everyone I’ve spoken to in this industry understood that regulation would bring credibility and validity to this sector,” Bragg said. 

“Canberra can sometimes have trouble catching up to the tech sector, where development is exponential, and that knowledge gap is even larger.”

Businesses embrace government regulation

While many companies involved in Web3 — the blanket term for technologies underpinned by the blockchain, including cryptocurrencies and NFTs — have welcomed government regulation, the wider business community has taken a more cautious approach.

According to a YouGov poll commissioned by Australian cryptocurrency exchange Swyftx earlier this month, the majority of Australian business leaders want to see stronger regulation before exploring opportunities to integrate crypto into their business.

Of the CEOs, managing directors and other senior decision makers interviewed, 81% said the introduction of a proper regulatory regime would increase the likelihood of their business using crypto for payments.

Jonathon Miller, managing director for crypto exchange Kraken in Australia, said the consultation process is a good start to developing a regime that understands “the opportunity for Australia to be a market leader in cryptocurrencies and fintech competition”.

However, Miller warned that regulation that is too stringent risks driving businesses looking to set up domestically, offshore. 

Ian Lowe, chief executive of digital wealth management platform Dacxi, said his business agrees with the government’s pursuit of greater regulation over voluntary codes of conduct, which had not worked in the local buy now, pay later (BNPL) sector. 

A robust licensing regime will make it easier to get the clarity needed from exchanges to accurately assess taxation of digital asset trading, Lowe said, noting tax processes for individuals and organisations currently engaging with crypto are messy and unclear. 

“If nothing else, clarity around the taxation of digital assets that will come with this exercise will be a relief for the nation’s accountants,” Lowe said.