In 12 easy steps, Australia plans to establish a crypto competitive advantage

In October 2021, the Senate Committee for Australia as a Technology and Financial Centre published its much-anticipated conclusions about how cryptocurrency should be governed. The final report is just over 200 pages long and contains 12 suggestions intended to strike the correct balance between providing legitimacy without suffocating innovation.

This is a major study that illustrates Australia’s strong drive to become the world leader in cryptocurrency investment. “Australia may be a global leader in digital assets,” asserted Senator Andrew Bragg, chair of the committee. He thinks Australia can compete with Singapore, the United Kingdom, and the United States.

Four key recommendations

The first, and most important, step is the creation of a plethora of new crypto-specific licenses and rules. For far too long, governments all around the world have been attempting to cram square pegs (cryptocurrencies) into round holes (traditional financial regulation). This method overlooks the fundamental distinctions that exist as well as the potential for digital. This paper recognizes crypto’s potential and asks for a variety of bespoke cryptocurrency licenses in Australia. It also advises the creation of a specific market licensing scheme for digital exchanges, as well as a specialized custody framework for digital assets. However, additional information will be required before these frameworks may be implemented.

Second, the introduction of a decentralized autonomous organization (DAO) entity type into Australian corporate law. This is a big deal because it indicates that the Australian government is receptive to decentralized finance (DeFi) and crypto innovation. The only state I’m aware of with anything like this in place is Wyoming, therefore might put Australia on the front foot. If enacted, DAOs might provide a unique service that may propel the Australian economy several years into the future. The Committee’s bill to legalise cannabis is, however, the most difficult to pass because legislation altering the Corporations Act is uncommon in Australia. However, if anyone can do it, it’s Senator Bragg.

Third, tax rules for crypto-to-crypto transactions. According to Finder research, over 17% of Australians own cryptocurrency, which is the third-largest proportion in the world. This growing community, however, has had to deal with complicated tax obligations. The Australian Tax Office previously considered crypto-to-crypto trades a capital gain. The IRS has officially stated that it considers bitcoin to be property for tax purposes, and the new guideline recommends that taxes only be levied when there is a “clearly defined capital gain or loss.” This time, the devil will be in the details, but active Australian crypto users may come out on top.

Fourth, the introduction of new tax incentives to boost green crypto mining. A 10% business tax reduction for crypto mining firms that use renewable energy is suggested by the Committee. Renewable energy and cryptocurrency are two high-growth Australian industries, and this appears to be a great idea to promote both of them.

Three issues

• Timelines for converting recommendations into legislation. These are only suggestions at the moment, and they have the same value as the political will that exists to implement them. Politics in Australia is likewise excruciatingly slow, so it will be no different this time. Andrew Bragg believes he can get all of his proposals passed within a year, and I believe he can do it. His campaign may also
• The effects of the pre-reform regulatory environment for crypto businesses.If it takes a year to put new legislation in place, what can crypto companies do during that time? Many comments requested a “safe harbour” from regulation until rules were finalised, but this was not explicitly advised by the Committee. The committee’s intention has been established, and there is broad support for cryptocurrency innovation as well as an acknowledgment that new
• Specifics on the licensing and tax plans. Many of these suggestions were vague, and it appears that the Australian Treasury will now take charge. The financial sector will be particularly interested to learn what standards for a custodian or digital exchange exist, especially with regard to capital requirements. Businesses would flee if there is too much regulatory burden. Consuming similarly, consumers will want more clarity on what constitutes

The following are some of the key takeaways for national governments all over the world.

The crypto sector is eager to discuss policy. It’s true that this Select Committee was flooded with comments from the cryptocurrency industry, academics, peak bodies and regulators. More than 100 written testimonies were submitted, as well as three full days of public hearings. It’s unusual for an industry to request more regulation, but that exactly what is happening here. The

Reviews are more successful when they are shared across teams. One of the biggest reasons for the high level of participation in this consultation was that it examined the digital asset industry as a whole rather than just from one perspective. Regulators all around the world are interested in looking at crypto assets from their own regulatory viewpoint, but broad progress shouldn’t be judged through such a narrow lens.

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