The Australian Government Needs to Get Ahead on Its Crypto Regulation
Australia is set to become the first country in the world to review cryptocurrency related reforms and create a regulatory and licensing framework for the cryptocurrency industry.
At the present time, crypto has been generally unregulated despite the Australian Tax Office (ATO) estimating that over 1 million Australians have been engaging with the crypto ecosystem in some way since 2018, and findings by the ACCC’s Scamwatch that more than half of financial losses to scams are related to cryptocurrency.
Jim Chalmers the Federal Treasurer has recently announced the process would begin with a token mapping analysis which will group types of crypto related assets based on their technological features and underlying code.
This outlines Australia’s global leadership ambitions on regulation within the crypto sector and a future-looking approach to policy development. However, it is also a clear example of how regulation and compliance have lagged behind the shifts and demands of consumer behaviour, particularly related to digital finance.
As the crypto industry and government try to catch up with consumer behaviour and how the crypto sector has continued to evolve, it will be critical for crypto service providers to ensure they do fall behind competitors or worse, suddenly become non-compliant and unable to operate at all.
Building trust amongst its citizens who are to engage with crypto is a vital problem the Australian Governments needs to tackle. Cryptocurrency has had a polarising reputation from its inception.
Many early adopters saw it as an exciting and equitable way of doing finance. However, critics have questioned the reliability and trustworthiness of crypto operators, who have more opportunities to remain anonymous when using cryptocurrency.
Adding more to the scepticism is research highlighting the rapid rise in crypto scams, with the ACCC’s Scamwatch reporting that in 2021 over $84 million was lost to scams involving Bitcoin. This was an increase from the $27 million lost in 2020 and $19 that was lost in 2019.
As the cryptocurrency industry continues to evolve and grow, competition is also becoming more prominent. A key way crypto service providers can thrive in this landscape is to proactively prioritise consumers’ security and safety. This will require a heavy focus on planning ahead for the regulations to come, which will likely place requirements on the sector to manage customers’ security and safety at comparable standards to other financial institutions, for example; banks.
When looking at the traditional banking industry, the introduction of open banking, CDR, and other regulations following the banking royal commission forced many financial institutions to act quickly while also finding the resources to meet compliance requirements. Financial institutions that had anticipated these changes were given an opportunity to act quickly and defeat competitors to offer new digital services.
