Australia Gears Up For The Crypto Era

FYI | Nov 16 2021

Regulators and banks prepare for a brave new crypto world as Australians champ at the bit.

-A series of major developments in the crypto sector signal a new chapter in Australian finance
-Alongside a report out of the Australian Senate, CBA customers will be able to trade cryptos via a new app
-ASX gains its first crypto-themed listing, the first of many

By Ed Kennedy

History is likely to remember 2021 as the year cryptocurrency achieved legitimacy in Australia and the world.

Crypto critics remain and many supporters still retain at least some concerns about the crypto universe, but not even the fiercest critic could deny that major moves this year have injected confidence into the sector, which is set to grow in size and support.

A review of big recent developments in Australia illustrates this vividly.

Those seeking to understand the Aussie crypto scene will need to understand how these landmark events will prove the cornerstones of a new era in Australian finance.

A Snapshot of Australia’s Embrace of Cryptos

Multiple statistics affirm that Australians have keenly embraced cryptos.

According to Finder's Cryptocurrency Report 2021 published in September, 17% of survey respondents indicated they owned cryptos as at June 2021. 

Another survey from Finder in January contended 25% of Australians either already held cryptos, or were planning to do so.  

The Senate Weighs In

Whenever a legislator mentions the crypto, the industry takes notice.

While cryptocurrency is by nature decentralised, the capacity of a centralised public authority to substantially enhance or hinder activities in the sector depends upon its  inclination.

The contrasting experiences of crypto traders and professionals in the US and China in recent months  - as discussed further in An Idea With Currency: The American Quest For A New Crypto Accord and linked below - are illustrative of this.

While digital currency exchanges have been required to register with AUSTRAC since 2018, the regulatory approach of Australia towards cryptos has been described as ‘light touch’ - until now. 

Substantial momentum for change has developed since the recent publication of a landmark final report by the Senate Select Committee on Australia as a Technology and Financial Centre.

Released in October, it offers 12 recommendations - reforms that aim to position Australia as a leading crypto hub. Such reforms would occur in the realms of licensing and regulation, alongside taxation.

Recommendation 1 calls for the Australian government to “…establish a market licensing regime for Digital Currency Exchanges, including capital adequacy, auditing and responsible-person tests under the Treasury portfolio.”

Recommendation 2 calls for the establishment of "... a custody or depository regime for digital assets with minimum standards under the Treasury portfolio”.

Concerning tax, there are two notable recommendations which, if implemented, would provide visible and direct outcomes to crypto traders and businesses alike.

Recommendation 6 suggests “…that the Capital Gains Tax (CGT) regime be amended so that digital asset transactions only create a CGT event when they genuinely result in a clearly definable capital gain or loss.”

Recommendation 7 proposes “…that the Australian Government amend relevant legislation so that businesses undertaking digital asset 'mining' and related activities in Australia receive a company tax discount of 10% if they source their own renewable energy for these activities.”

Other recommendations from the report are sure to generate significant discussion such as the call for a policy review into the prospects of a central bank digital currency (CBDC) as proposed in Recommendation 8.

Similarly, Recommendation 10’s proposal “…that in order to increase certainty and transparency around de-banking, the Australian Government (should) develop a clear process for businesses that have been de-banked” and that it “should be anchored around the Australian Financial Complaints Authority which services licensed entities”, is particularly significant given de-banking is an issue of anguish for much of the local crypto scene.

Commonwealth Bank of Australia's ((CBA)) announcement of a trading platform adds another layer to this, as shall be discussed further along.

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