Some crypto experts have expressed concerns about Australian laws to keep up with the development and adoption of digital currencies in the country. They suggest that the government’s outdated regulations are leaving the crypto industry “vulnerable.”
Statistics show that more than 25% of the Australians – 6 million people – own cryptocurrency. But the regulatory framework has failed to keep up with the constantly evolving sector.
Digital Economy Council of Australia managing director Amy-Rose Goodey says it’s challenging for crypto businesses to make big jumps in the currency environment: “While we appreciate the increasing engagement with our regulators, without clarity, there’s a palpable sense of vulnerability throughout the industry.”
Crypto exchange Kraken has also expressed dissatisfaction with the current regulatory landscape in Australia, calling it “deeply unsatisfactory.”
Australia has taken more important steps towards reform, but more legislative efforts are still needed since legislation could be delayed until 2025, or even beyond.
“There is strong evidence to suggest that the lack of regulatory clarity is driving businesses to seek opportunities abroad, impacting jobs, skills, and talent resulting in significant economic impact,” Goodey says.
“We need to be a fast follower, working in line with our global neighbours to ensure Australia doesn’t miss out on leadership in a market that is set to be worth $3 trillion in global trade by 2030.”
The Kraken Case Study
A recent Federal Court ruling has revealed a gap in Australia’s cryptocurrency regulatory framework. The crypto industry views the decision in ASIC’s case against Kraken as evidence that the country’s cryptocurrency ecosystem is in a state of regulatory uncertainty, which is leading to investment hesitations and talent loss. However, the ruling has also sparked industry-wide demands for immediate legislative reform.
The court ruled that Kraken must provide a Target Market Determination (TMD) when offering its Margin Extension product in fiat currency, such as Australian dollars. However, this requirement does not apply when the margin is extended in cryptocurrency. A TMD is a document that specifies who a financial product is suitable for and the conditions for its distribution.
Kraken’s General Manager for Australia and Rest of World, Jonathan Miller, criticised the ruling, stating that current laws are inadequate for regulating cryptocurrency. Despite the disappointment, Kraken has adjusted its offering to comply with the decision and continues to push for tailored crypto legislation that would foster innovation and economic growth in Australia.
The judgement underscored that existing laws do not fully cover cryptocurrency, as assumed by ASIC. Both the crypto industry and legal experts agree that clear legislation, rather than costly legal battles, is necessary to address the regulatory gaps.
Global Competition for Crypto Regulation
Governments in North America, Europe, and other regions are moving swiftly to establish regulations that support the growth and trust of crypto assets. Liam Hennessy, a partner at Clyde & Co specialising in financial regulation, notes that while Australia is making progress with the Treasury and ASIC, political support for the crypto sector has been insufficient compared to countries like the UK and US. Hennessy emphasises the need for targeted political backing to attract international investment and provide greater certainty for businesses and consumers.
Kraken’s Miller commends global regulatory advances, arguing that they are crucial for fostering both innovation and investment. He believes that clear regulations not only protect investors but also provide a framework for economic growth, as more crypto companies and developers establish operations in Australia. However, without well-defined rules, the country risks losing investment opportunities to other regions with more robust regulatory systems.
