Bull market, bear market. Regardless of your opinion on the current cycle, there is no doubt that cryptocurrencies are going mainstream. At an institutional level, multi-billion dollar enterprises such as Coinbase and Binance have emerged; traditional financial giants such as JP Morgan and Commonwealth Bank of Australia are looking to provide crypto-related services. At a consumer level, we are seeing more and more traditional investors viewing cryptocurrencies as an asset class to be included in their portfolios.
Given the increased adoption of crypto and the amount of money that is involved, a topic that has become hotter and hotter recently is the role that regulation plays. In Australia, we think there is an argument that cryptocurrency exchanges are still under-regulated, meaning that the compliance obligations are somewhat disproportionate to the amount of assets that is held. A crypto exchange can simply obtain a registration with AUSTRAC before they are open for business.
Industry calling for more regulation
Interestingly, in the Australian crypto scene, it is the industry participants who started calling for more regulation. The motive? One obvious implication of more stringent regulation is that the barrier to entry is also higher, therefore favouring the current industry incumbents. To this end, industry associations have also been formed, some have their own Codes of Conduct that goes above and beyond what the current regulations require.
Regulator’s role to date
We think the Australian regulators have been deploying a continued effort to provide a clearer regulatory framework for the industry going forward. For example, the Commonwealth Treasury has set out a series of milestones that it would aim to achieve by the end of this year. Importantly, this includes a dedicated licensing regime, mapping the risk of existing cryptocurrencies, as well as the taxation of digital assets. On a number of occasions, industry participants were asked to make submissions so their voices could be heard.
The challenges
~Novel Serialisation: Heavens Fire~
We believe that the key challenge for the current regulatory framework is that there needs to be a balance between innovation and consumer protection. There is a hypothesis that regulators are more focused on consumer protection, because that is where the spotlight is if things go wrong. However, by forming a regulatory framework that is too strict will risk Australia losing its innovative edge, which can lead to losing promising businesses, talents and jobs to overseas jurisdictions.
Another key challenge for the regulators is to stay dynamic and not becoming outdated. The crypto world is constantly evolving, arguably at a speed that is rarely seen before. Concepts such as ICOs, DeFi and NFTs have only become hot trends over the past few years. This fast-moving nature of the industry poses an inherent challenge for any regulators and law-making bodies.
Conclusion
We think Australia is a fertile ground for innovation and is punching above its weight when it comes to the cryptocurrency movement. It would be a pleasure to see more crypto businesses that are based in Australia to become well-known global names, following the footsteps of the likes of Immutable X, Synthetix.io and STEPN. We believe that regulation plays an important role not only in consumer protection, but also in maintaining the fine balance to ensure that the Australian crypto industry remains competitive at a global level.
What are your thoughts on the status of the current regulatory landscape in Australia? Feel free to reach out to the author at ting@coinstash.com.au to start a conversation.
By Ting Wang
About the author
Ting Wang, Coinstash Co-Founder and Chief Executive Officer
Ting co-founded Coinstash with a clear and simple mission: to create a gateway for Australians to access the world of crypto. He is doing this through a secure and trusted digital asset platform that unlocks the potential of cryptocurrency and traditional finance.
A strong advocate for regulation and compliance in the crypto industry, Ting is led by
by his vision and values, underpinned by a legal, financial and professional services background in highly competitive and high-performing roles at KPMG and Global Payments.
A keen investor himself, Ting has created a successful cryptocurrency investment portfolio. He brings his strategic planning and leadership experience along with an intimate knowledge of global macroeconomics and different asset classes to deliver a best-in-class and competitive crypto product to market.
