When the government puts a call out for submissions on the future of finance in Australia, mentioning the words “cryptocurrency” and “blockchain” in its terms of reference, it should come as no surprise the responses include plans on how to profit from mining bitcoin and testimony that crypto is not just a Ponzi scheme.
One submitter, Swyftx, an Australian cryptocurrency broker, has asked the Senate Select Committee on Australia as a Technology and Financial Centre to look at regulation, but in a manner that doesn’t stifle innovation.
Specifically, it considers “de-banking” a barrier to success as a crypto business and has also requested a digital asset regulatory regime.
“The basis for traditional banks unwillingness to bank digital assets companies to date, which have relied on some arbitrary and ill-advised notion of ‘increased risk’ related to digital assets is no longer an acceptable or good faith approach, and is beginning to look like anti-competitive behaviour born of self-interest and at the expense of consumer confidence and protection,” Swyftx said [PDF].
“A clear regulatory regime is needed which provides for government to prevent traditional banks withholding services to digital asset service providers (acting as unauthorised gatekeepers to the system), but which also establishes clear and robust registration and licensing requirements for digital asset service providers to assuage both consumer and bank concerns around the particular risks posed by individual digital asset service providers.”
The company also said Australian consumers are demanding access to cryptocurrencies and associated services, and that they “deserve that access to be provided safely, securely, and reliably”.
While one submission [PDF] to the committee suggests Australia has a “real opportunity to become the epicentre of bitcoin mining by tapping our existing mining knowhow”, many other players in the local crypto space have echoed Swyftx’s requests to be included in regulation, with Kraken, for example [PDF], highlighting existing regulation is not sufficient.
“In many instances, the response by governments to the need to regulate a new industry is often to apply by default existing regulatory regimes that are not necessarily suitable to address the risks associated with a new ecosystem as the one that blockchain technology and virtual assets present,” the cryptocurrency exchange wrote.
“We encourage policy makers to carefully assess the risks that virtual assets pose and consider alternative regulatory approaches that are ‘fit-for-purpose’.”
R3, an enterprise software platform with blockchain roots, believes simplicity is key in designing frameworks.
“Layering additional regulations on top of already robust and effective frameworks would only complicate the industry and inhibit innovation with no resulting upside. With digital assets, it is important to emphasise that the regulatory regime should not create a scenario in which the same instrument in digital form is subject to heightened regulation from when it is in traditional form,” it said in its submission [PDF].
“Also, it is important to ensure that there is no regulatory confusion created by the development of a second and potentially overlapping regime for some assets. Therefore, we propose that the Australian government aligns digital asset regulations with requirements imposed on the same asset in its traditional form, with the principle of ‘same risk, same activity, same treatment’.”
Bitaroo, meanwhile, wants Australia to take a leaf out of El Salvador’s book and recognise bitcoin as a foreign currency.
“Living in a country such as Australia it is easy to look past the difficulties that those with no steady income nor bank account experience on a daily basis. Bitcoin can help to free these people and their families from generational poverty by allowing them to save, share and transfer value digitally, instantly, and without the need of a bank or physical financial institution,” it wrote in its submission [PDF].
“By recognising bitcoin as a foreign currency and by exempting capital gains tax on foreign currencies, Australia has a unique but rapidly diminishing opportunity to position itself as a global and forward-thinking leader in this space.”
“Bitcoin is a nascent technology that will continue with or without Australia,” Bitaroo threatened.
But as the Reserve Bank of Australia notes in its submission [PDF], “The effect of the Currency Act 1965 is that crypto-assets are not legal tender, though this does not prevent their use where both parties wish to do so.”