Australian Senate releases long-awaited crypto report

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In what has been described as a ‘day of the red letter’ for the Australian crypto industry, the Senate released its third and final report on the state of blockchain regulation in the country, providing a leaf route to policy makers on how best to take advantage of the booming industry. Led by Senator Andrew Bragg, the Special Senate Committee on Australia as a Technology and Financial Center focused on improving Australia’s competitiveness in the global crypto industry.

“It will boost investment and jobs in Australia,” Bragg, a blockchain advocate, said in a statement. “We will be competitive with Singapore, the United Kingdom and the United States”

Comprising 12 recommendations, the report discusses the country’s regulatory approach to crypto and digital assets, the persistent problem of the ‘debanking’ of crypto firms in the country, and the political environment for neo-banks. After delivering a previous report in April, an industry observer told Forkast.News that she was impressed with the report’s speed and scope.

“What might not necessarily be appreciated outside of crypto is how complex some ideas and concepts are,” said Caroline Bowler, CEO of digital asset exchange BTC Markets, who also sits on the Board of Directors of Blockchain Australia. “What really impressed me and exceeded my expectations is the depth to which this report has gone.”

Indeed, the report even made recommendations on Decentralized Autonomous Organizations (DAOs), recommending that the government establish a corporate structure for these organizations, with Bowler saying the inclusion of such elements is ambitious.

About 18 months ago, BTC Markets was exploring the best avenues for growth, but many ideas often resulted in what Bowler described as frustration with the existing regulatory and licensing frameworks in the country. She therefore welcomed the report’s first recommendation to the Australian government to establish a market licensing regime for digital currency exchanges.

“A lot of times we kept running into the same problem that we couldn’t access the right kind of license or regulation because they were designed for traditional finance,” she said. “So the fact that this report is specifically designed for us and for the future is fantastic. This is precisely the sort of thing I was looking for.

Currently, a digital currency exchange office does not require a license to operate in the country if it does not offer a financial product – cryptocurrency is not considered. The main regulatory framework for these exchanges is that they must be registered with the Australian Center for Transaction Analysis and Reporting (AUSTRAC).

The introduction of licensing is not, however, welcomed by everyone; Australian chief executive of the Kraken digital asset exchange, Jonathon Miller, told Forkast.News, although he encourages the report’s recommendations not to be too prescriptive and broadly supports them, but he has reservations.

“What worries me a bit is the sense of urgency around a licensing regime and a custodial regime for crypto, when we know there is no suitable regime. for the use that we can see in the existing regulatory environment, “he said. “In fact, I don’t yet think there is a good model of offshore working that we can build on.”

Miller believes that much of Australia’s existing regulatory framework for its anti-money laundering and anti-terrorist financing requirements is already adequate and that there is no need for onerous licensing requirements. . He points to the high level of crypto penetration in Australia as proof of this; a recent report from Australian comparison site Finder.com found that 17.7% of those surveyed had some form of cryptocurrency, well above the global average of 11.4%.

“The evidence is there,” Miller said. “We have a great result for consumers and I don’t think we should play too much with it. The risk is that trade will delocalize because licensing regimes can be very onerous, very expensive, and those costs ultimately end up on the shoulders of the consumer. “

De-banking of crypto companies

The issue of removing crypto companies from banking has been a hot topic in Australia lately; While some of the largest banks have categorically rejected this practice, the report lists numerous examples of crypto firms of all sizes being repeatedly denied service by banks, sometimes with minimal notice or reason.

As Forkast.News recently reported, one such firm, Canberra Bitcoin, recently struck a deal with ANZ – one of the country’s “big four” banks – on debanking charges in court. ‘hear the case. A second court to hear similar charges brought by business owner Allan Flynn against another major bank, Westpac, is currently pending.

Bragg said he recognizes the challenges of solving this problem. “We are not telling banks who to turn to, but we will step in to provide political certainty where it is lacking,” he said in a speech at Blockchain Australia Week in April. “It’s the separation between the market and political issues. Canberra [Australia’s capital city] does not solve market problems. We are not telling the banks to fund a particular project. We have established a political framework based on our governance philosophy.

The report recommended that the Australian government develop clear processes for companies that have been de-banked, which should be anchored around the Australian Financial Complaints Authority.

As the name suggests, Australia relies heavily on the Big Four – ANZ, Westpac, Nab and the Commonwealth Bank – and they have played a central role in this issue of debanking. Miller says that of the 190 countries in which Kraken operates, it has strong banking relationships in all of them – Australia is the only one where eliminating banking is still part of the conversation.

“There is just a lack of vision around the opportunity,” he said. “There have been some very supportive small banks in Australia that fully seize the momentous opportunity and they have been really supportive… [but generally] the Australian banking industry here, I think, is missing a tip.

Tax reporting obligations

Earlier this month, the Australian Tax Office told the Committee it was concerned that many crypto investors in the country were unaware of their tax reporting obligations. As it stands in the country, it is considered a taxable event every time the cryptocurrency is traded and is therefore subject to capital gains tax, not just gains or losses. net at the end of the year.

The committee recommends, however, that this process be simplified, by streamlining the capital gains tax regime so that a taxable event is triggered only when digital asset transactions actually result in capital appreciation or loss. clearly definable. Miller welcomes this recommendation, calling the existing tax framework unsuitable because cryptocurrency transactions are often more sophisticated than simple transactions.

“[Often traders] don’t buy and sell for profit, ”Miller said. “What they are doing is switching to other assets, to participate, for example, in distributed applications. And yet they are penalized without realizing it by the ATO. I think it is. is wrong and I welcome an opinion.

As policymakers around the world begin to grapple more with the reality of taking positive action on climate change, this can often put energy-intensive blockchain in the spotlight. Bitcoin in particular with its proof of work consensus mechanism is often criticized for this and is one of the central arguments used by opponents of the technology. As the debate on the availability and affordability of renewables versus non-renewables continues, the Committee makes the new recommendation to offer a 10% tax break to companies that source 100% of their energy from non-renewable sources. from renewable sources.

“It’s very forward thinking,” Bowler said of the recommendation. “It’s really great to see that they are trying to find different ways to stimulate this kind of activity. “

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