A Senate enquiry proposed changes to taxation laws, licensing, and regulatory regimes to encourage crypto and blockchain businesses to set up shop in Australia.
Will Australia turn into a crypto hub?
Much has been made of the reluctance of Australian regulators to give better guidance and regulatory clarity to cryptocurrency businesses. Some, like Senator Braggs, have argued that Australia should become a crypto hub and that the country would risk falling behind on financial innovation and the next big thing in technology, losing credibility in the process and allowing other countries to set the agenda. Others, as the Australian government, have adamantly been ignoring the bubbling interest in cryptocurrencies, which saw a 186 percent growth in retail adoption in the country.
That may be about to change, though, as the Select Committee on Australia as a Technology and Financial Centre, originally set up to investigate how to regulate crypto and digital assets, made 12 recommendations on how authorities should further proceed on cryptocurrencies. These include new regimes for market licensing for digital currency exchanges (DCEs), custodial and depository services, and changes to anti-money laundering and counter-terrorism financing guidelines, making them “fit for purpose.” With the crypto industry thus far being largely unregulated, even though it manages billions of dollars in trades a year, further guidance was overdue. As it stands, registering with the anti-money laundering regulator AUSTRAC is the only requirement needed to operate a DCE.
The crypto industry had also called for scrapping capital gains taxes on digital assets. To that, the committee responded with a recommendation to apply them only “when there is a clearly definable capital gain or loss” in a trade. What would trigger such a clearly definable gain or loss remains unclear.
The committee further recommends applying a 10% tax discount to businesses that source their own renewable energy for mining cryptocurrency. An outspoken proponent of crypto adoption in Australia, Andrew Bragg said that he believed the recommendations to strike the right balance between encouraging innovation and protecting consumers. Bragg targets legislation of the recommendations within 12 months, notwithstanding a looming federal election, as time was running out to make a move on crypto: “I’m concerned about the brain drain and the loss of good people really, because you’re already seeing Australian crypto markets seeking licences offshore,” he is quoted.
Tepid reactions to the report
Not everyone was impressed by the eventual response from the public sector. Aaron Lane from the RMIT Blockchain Innovation Hub called the report forward-thinking and an important first step, reminding officials that the clock was ticking on crypto regulation: “There is some urgency about it,” he said. However, Nick Abrahams from Norton Rose Fulbright criticised the lack of detail in the report, lamenting that it was kicking the can further down the road and engaged in being a token mapping exercise when it should be tackling the problem head-on. Venture capitalist Mark Carnegie voiced doubts about whether the report’s recommendation would be implemented and wondered if regulators were even in a position to keep up with the pace of innovation happening in crypto.
