As crypto winter sets in once more, industry players in Australia, one of the world\u2019s most crypto-friendly nations, watch closely for a shift in the regulatory climate.<\/strong><\/p>\n Anthony Albanese, the new Australian Labor Party prime minister, has made regulating crypto a top priority. However, neither he nor his cabinet has given a clear indication of how it may approach the unregulated space.<\/strong><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u201cLabor campaigned for government without a policy for cryptocurrency,\u201d says Senator Andrew Bragg, a member of the Liberal Party, which was recently cast into opposition after nine years in government.<\/p>\n The 37-year-old spearheaded a Senate report on crypto regulation last year that made 12 key recommendations on issues ranging from exchange registration to taxation and debanking. Speaking at the Australia Blockchain Week conference in March, he proposed the Digital Services Act<\/a>, a legislative package that consolidated the report\u2019s recommendations into law.<\/p>\n However, Bragg\u2019s Liberal Party lost its parliamentary majority to the Labor Party in a federal election in May, and the act\u2019s future remains uncertain.<\/p>\n \u201cThere have been no utterances about what Labor\u2019s policies will be. It could be anything at this stage,\u201d he added.<\/p>\n The Treasury declined to comment on its crypto policy plans for the report. So far, the office has only clarified that it will continue to exclude crypto from being taxed as a foreign currency, following El Salvador\u2019s adoption of Bitcoin as legal tender.<\/p>\n Industry folk can only guess what the new government might do next, but Ron Tucker, founder and chair-emeritus of lobby group Blockchain Australia, sees a \u201csilver lining\u201d to this pregnant pause. He warns against the kind of knee-jerk responses to market volatility seen in other countries.<\/p>\n \u201cThough we need to protect consumers, if we rush regulation, we will likely get the settings wrong, which will stifle innovation in the ecosystem and lock Australia out of the future growth of the global crypto market,\u201d Tucker says.<\/p>\n \u201cIn truth, the proposals made in the Bragg report are only about 70% of the way. They could do with more work, and recent events such as the collapse of TerraUSD and Celsius have shown where the gaps are. We are now at a critical juncture, and so this is a chance to ensure we don\u2019t head down the wrong path.\u201d<\/p>\n<\/blockquote>\n While the focus has been on knee-jerk bans and crackdowns elsewhere, Australia has been quietly trailblazing a progressive approach to crypto.<\/p>\n \u201cThere is an unsung story of Australia as a first-mover in this space,\u201d says Tucker, who founded Bit Trade \u2014 one of the country\u2019s first successful cryptocurrency exchanges \u2014 in 2013 and shortly after led the Digital Currency Code of Conduct initiative that set the best-practice standards for the self-regulatory model that has undergirded the Australian crypto industry since.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Tucker recalls watching the pennies drop as he walked politicians in Canberra through the Bitcoin white paper back in 2014.<\/p>\n \u201cThe government was very responsive and endorsed our proposals for a self-regulated code of conduct, which was the first of its kind in the world,\u201d he says.<\/p>\n \u201cThere were not many other industry bodies in other countries at the time, but more soon followed.\u201d<\/p>\n<\/blockquote>\n The proposed self-regulating model was exported after Tucker\u2019s group joined with counterparts in Singapore and the United States by setting up an informal alliance, the Global Blockchain Forum, in 2016. It then grew to have a dozen other member countries that coordinated through a multilateral memorandum of understanding based on the preexisting Australian code of conduct.<\/p>\n While this light-touch approach has given Australian projects space to grow over the years, the government will need to devote greater resources to formalize and enforce a regulatory model as mounting issues exert pressure on the ecosystem.<\/p>\n \u201cYou need to get the balance right and have a principled approach that remains flexible enough to encourage innovation in the industry,\u201d says Caroline Malcolm, head of international public policy and research at Chainalysis \u2014 an industry consulting firm and blockchain analysis company that recently set up shop in Canberra.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Crypto ads are in the crosshairs of Australian regulators. The country\u2019s top consumer watchdog, the Australian Competition and Consumer Commission, or ACCC, recently took Meta to court, alleging the company is legally responsible for losses incurred by users who engaged with scam crypto ads featuring fake celebrity endorsements that have run on Facebook since 2019. This has renewed the conversation around consumer protection for crypto investors in policy circles.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Malcolm predicts Australia will likely follow in the United Kingdom\u2019s footsteps when it comes to advertising.<\/p>\n \u201cAustralia has historically had a regime for financial products similar to the U.K., so it is probable it would adopt the same standards for the advertising of crypto,\u201d she says.<\/p>\n \u201cThese include stipulating that companies clearly include a risk disclosure that is put alongside the advertised benefits of the product. It would also see crypto companies come under the advertising regulatory regime and ensure they are responsible for the content of their ads, regardless of the legal structure of their business.\u201d<\/p>\n<\/blockquote>\n Tucker believes that \u201ctoken mapping\u201d must be the new government\u2019s top priority.<\/p>\n \u201cThis is the most important aspect, as it gives an overview of what\u2019s happening and provides a blueprint for the government to respond to new developments in this rapidly changing industry,\u201d he says.<\/p>\n A token mapping exercise was the third recommendation of the Bragg report, suggesting the government draft legal definitions of the different types of digital currencies by their functions. In March, Australia\u2019s Treasury published<\/a> a consultation paper on a proposed regulatory framework that featured a list of working definitions for tokens.<\/p>\n \u201cThis paper contained a detailed token mapping that went much further than typical distinctions, like what security and payment tokens are,\u201d says Malcolm.<\/p>\n The report details at least 12 working category definitions for tokens in a \u201cnon-exhaustive list.\u201d The government aims to complete the mapping exercise by the end of the year.<\/p>\n \u201cThis shows a commitment by the government to get across what is going on, and this will be essential for future-proofing regulation here,\u201d Malcolm says. \u201cKeeping the recent momentum from this public consultation will be crucial,\u201d she adds.<\/p>\n The Treasury\u2019s paper also proposes rules for \u201csecondary service providers who operate as brokers, dealers, or operate a market for crypto assets.\u201d Its stated rationale is to minimize the risk consumers face when service providers become insolvent and they cannot withdraw their funds. Critically, however, it specifies that these rules would not apply to \u201cdecentralized platforms or protocols,\u201d leaving DeFi alone.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u201cThis is a sign that Australia could end up with a very interesting model for the fast-moving DeFi space,\u201d says Malcolm.<\/p>\n \u201cExcluding DeFi itself is not a \u2018rogue\u2019 approach, however,\u201d she says. \u201cThe EU is excluding DeFi from its Markets in Crypto-Assets regulation, which is due to be finalized shortly.\u201d (Following our interview, the MiCA regulations were agreed on.) \u201cBut the EU has also said they will be looking to write rules for DeFi in the \u2018near future.\u2019\u201d<\/p>\n If Australia were to do the same, how would it determine which entities are adequately decentralized?<\/p>\n Malcolm calls this the \u201ceternal question\u201d that hangs over regulators.<\/p>\n \u201cThere is certainly a view from some policymakers that what is called \u2018DeFi\u2019 is not always decentralized,\u201d she says. \u201cHow decentralized are those platforms really?\u201d<\/p>\n \u201cIf it\u2019s sufficiently centralized, it should fall within the existing rules,\u201d she says. \u201cIt is very hard to draw that line, but resolving this is key to determining where the rules apply.\u201d<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Another persistent risk for crypto businesses is debanking \u2014 when a bank cuts off services to businesses or people it determines to be risky.<\/p>\n The Australian government has identified debanking as a growing problem and recognizes that digital currency exchanges and fintech firms are disproportionately affected.<\/p>\n \u201cDebanking has been rampant in Australia since the early years of crypto,\u201d Tucker says. \u201cOur exchange has experienced debanking on at least 30 occasions.\u201d<\/p>\n \u201cWe brought it to the ACCC\u2019s attention at the time, and they would have liked to have responded, but they were too understaffed to do anything about it,\u201d he adds.<\/p>\n \u201cBusinesses should have a fundamental right to banking, just like individuals, but it\u2019s not just about writing the laws. We need to make sure agencies like the ACCC have the human resources to manage and the teeth to pursue anti-competitive behavior,\u201d says Tucker.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Although the Labor government has not announced a clear agenda for crypto, reinvesting and restaffing the public service is a policy priority for the Albanese administration. Under the previous government, outsourcing public jobs doubled between 2015 and 2020. The new government has already pledged 500 million Australian dollars for the first phase of rebuilding public sector capacity.<\/p>\n Malcolm agrees that finding qualified officials not just to write the rules but administer the legislation is critical, but it will be an uphill battle.<\/p>\n \u201cCapacity of expertise is very tight,\u201d she says. \u201cThere is not enough expertise among the bureaucracy at the moment, and it takes time to find the right people. It\u2019s one thing to write the rules but quite another to have the resources to administer them,\u201d she adds.<\/p>\n \u201cThere\u2019s this strong perception that crypto doesn\u2019t want to be regulated. But what we\u2019ve seen when countries put licensing rules in place is that the exact opposite happens. Suddenly, there\u2019s this rush to register because companies see it as a net positive. Many governments are struggling to keep up with this demand for licensing, as most recently seen in the United Kingdom.\u201d<\/p>\n<\/blockquote>\n The same could happen in Australia when rules are standardized and the registration wave hits.<\/p>\n \u201cWe really need a committee of technologists that acts as a bridging body between industry and government,\u201d Tucker says. \u201cA group established in partnership with Australia\u2019s Commonwealth Scientific and Industrial Research Organization would likely be the best avenue for this,\u201d he adds.<\/p>\n The unprecedented nature of blockchain technology poses unique challenges for policymakers, which incentivizes governments to work together to identify regulatory best practices. Yet, with enormous potential economic value at stake, states are also vying to attract as much of the burgeoning investment it brings as possible.<\/p>\n Foreign investment in Australia has grown at around 8% per year for the past two decades, now standing at over 200% of total GDP. With finance remaining the third-largest sector for inbound investment, regulators are looking to harness crypto, blockchain and DeFi to spur growth further.<\/p>\n \u201cThe fact is, we are in a race against the U.S., Japan, Singapore and other advanced economies,\u201d says Bragg. \u201cIt\u2019s a race to build the most effective regulatory environment for cryptocurrency, and it plays out across investment, talent and consumer protection.\u201d<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u201cThe Labor government has inherited world-leading policies from the Liberal Party when it comes to cryptocurrency. I believe this parliament can deliver on the bulk of the recommendations made in the Senate report.\u201d<\/p>\n Tucker says that while Australia is well positioned, with a strong financial services sector, it should prioritize collaboration with other economies over competition.<\/p>\n \u201cThere is a far greater upside to international collaboration at this early stage,\u201d he says.<\/p>\n \u201cWe should be learning from each other and closing loopholes together. A patchwork of contradictory laws across jurisdictions will weigh down the development of crypto globally.\u201d<\/p>\n<\/blockquote>\n Sound regulation has underpinned the robust development of Australia\u2019s traditional finance sector. Its banking sector has historically been among the most profitable globally, while its compulsory national retirement scheme, called \u201csuperannuation,\u201d was ranked<\/a> the fifth-best pension scheme in the world last year.<\/p>\n \u201cCryptocurrency is possibly the greatest economic opportunity this country has had since the advent of superannuation,\u201d says Tucker. \u201cBut we must get the policy settings just right.\u201d<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/div>\n![\"Australia's](\"https:\/\/cointelegraph.com\/magazine\/wp-content\/uploads\/2022\/07\/magazine-Australias-crypto-law-1024x576.jpg\")
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Pioneer of self-regulation<\/h4>\n
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<\/p>\nFraudulent advertising<\/h4>\n
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Mapping things out<\/h4>\n
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Disrupting debanking<\/h4>\n
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Collaboration over competition<\/h4>\n
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