Australia is lagging on crypto regulation. There’s a lot at stake, which has brought the Australian crypto industry together – as Kraken’s Managing Director for Australia, Jonathon Miller, explains…

 

Aussies love crypto – nearly one in every four Australians have owned cryptocurrencies, the highest adoption rate globally. Despite this rapid embrace of blockchain technology, we have been behind the curve to implement a regulatory framework that will govern digital assets for the long term.

While interest in digital assets in Australia and around the world has rebounded, a lack of clear regulation could see us fall behind leading financial markets like Singapore, Europe and the UK. Regulation, when done right, provides entrepreneurs and established industry players a rulebook they can refer to when making decisions, gives investors a better idea of what crypto projects to invest in and protects consumers from unscrupulous practices.

 

Shaping Digital Asset Regulation in Australia

So, what does good regulation look like? Earlier this year, Kraken was invited to collaborate with other leading experts in Australia’s blockchain and digital asset industry to develop a set of recommendations for how a regulatory framework could function.

Here are some of the key takeaways from this work which form the basis of what Blockchain Australia will be advocating for as we seek to develop a fit-for-purpose regulatory framework.

 

Recommendations from the Custody and Asset Management Roundtable

  1. Resolve Debanking of Crypto Businesses

One of the most frustrating things individual investors face is unwarranted service refusals from traditional finance players, and this also affects confidence in the commercial side of the digital asset sector. Blockchain Australia recommends creating a standard framework for banks to assess risks when dealing with crypto businesses, inspired by successful models like Hong Kong’s, in order to bring more confidence and certainty to transactions between crypto and fiat currencies.

 

  1. Information Sharing and Scam Mitigation

To tackle scams, we need to improve information sharing pathways between banks, digital asset exchanges (like Kraken), and regulatory bodies. Establishing industry wide standards for scam prevention through the use of advanced analytics  helps protect consumers and encourage safer crypto transactions.

 

  1. Create Clear Token Taxonomy

‘Crypto’ is shorthand for a very broad spectrum of thousands of assets. Developing a clear token taxonomy to differentiate between various types of digital assets will go a long way toward providing clarity that will help investors make informed  decisions as they navigate the crypto market with more confidence.

 

  1. Consumer Education Programs

As an industry, we have much more educational work to do than just highlighting how to avoid scams. Launching comprehensive consumer education programs that cover all aspects of digital assets shouldn’t just be an aspiration, it should be table stakes for any crypto business. These resources need to be accessible to a broader audience base, including,  regulatory stakeholders, institutional audiences, and individual investors. . By developing a central hub for accurate educational materials and aligning them with industry needs, we can bridge the knowledge gap and drive greater crypto adoption.

 

  1. Simplify the Tax Treatment for Cryptoassets

Currently, crypto adoption is held back by people not understanding tax obligations when they trade or transact with cryptocurrencies. Simplifying the tax reporting and compliance processes for crypto assets will go a long way towards setting expectations with the crypto community. Clearer tax classifications and a standardised reporting process would make it easier for everyone to meet their tax obligations without confusion.

 

  1. Custody

We advocate for clear regulations on custody, focusing on regulating entities that have direct control over consumer assets. A flexible and adaptable regulatory approach that differentiates between direct and indirect control of assets will ensure that custody practices keep up with technological advancements and continue to protect consumer assets effectively.

 

A Path Forward

The blockchain industry, despite its increasing popularity, is still a nascent one – particularly in comparison to traditional finance. Regulation that protects  consumers whilst also enabling market competition and innovation is a difficult balance, but will be vital as the economy becomes even more digital.

Slow action or the wrong approach from policymakers could risk capital flight and see Australia lose leadership in a market that is set to be worth
$3 trillion in global trade by 2030
. There’s a lot at stake – and Kraken is proud to be a part of helping the industry grow in Australia.t

 

This article was developed in collaboration with Kraken, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.