The case for accelerating Australia’s crypto regulation

Special report: Kraken’s Jonathon Miller believes the Australian crypto industry’s need for clear regulation is very much still a matter of urgency.

Last year Australian regulators began the process of developing a regulatory framework for cryptocurrency and blockchain technology. With other jurisdictions globally well ahead in their efforts to establish rules that govern digital assets, some in the crypto industry may be wondering whether there is an uphill climb in order to position Australia for the growth in this technology.

I recently made a trip to Canberra to discuss Australia’s regulatory landscape for crypto and to provide my insights, through the lens of heading one of the leading crypto platforms in the country, on what the industry needs to remain successful.

On reflection, I am optimistic about the road ahead and left the trip pleased to see a palpable appreciation for crypto’s utility and innovative potential from most, if not all, of the politicians I met.

That said, we still need to see continued progress, as further delays to a crypto regulation regime could see the Australian crypto industry lose ground to overseas markets.

The case for expediting crypto regulation

A robust domestic crypto industry is something that every Australian should care about. The inherently global nature of the crypto negates the ‘tyranny of distance’ that Australia has long contended with as trade grew to become more global in nature.

Further, with this technology expected to add around $2 trillion of value to the global economy by 2030, there’s massive economic potential including jobs, taxation, and economic investment at stake.

If that number seems a little high, it’s worth remembering that crypto is still in its infancy – echoing the sentiment of BlackRock CEO, Larry Fink, we are in the beginnings of a new financial system.

We therefore have a hefty responsibility, and opportunity, to shape this new financial system with regulation that prioritises continued innovation and consumer protections at the forefront.

Why the government should embrace crypto

Almost a third (31.6%) of Aussie adults hold or have held digital assets. This is before a regime is in place to signal how specific components of the industry, such as stablecoins or market structure, will work long term. Crypto has clearly passed an inflection point, and uncertainty around the regulatory treatment of crypto assets is becoming an impediment to widespread adoption.

From early on, the Australian federal government has signalled its willingness to work with the crypto industry, not stand in its way.

The increasing mainstream acceptance of crypto acted as a catalyst for the 2024 Federal Budget’s allocation of $7.5 million over four years (and $1.5 million per year ongoing) set aside to ‘modernise regulatory frameworks for financial services enabled by new technology’.

If implemented the right way the Treasury’s framework will provide an additional layer of certainty to stimulate local crypto industry growth, increase investment and allow Aussie investors to make informed decisions about their wealth-building strategies that include crypto assets as part of a broader portfolio.

This is an excellent starting point and, if enshrined in legislation, will enable digital asset businesses to make long term investments in Australia.

To put it simply: regulation provides companies the confidence to double down on their commitment to the market; to rent office space, invest in local marketing, create new jobs and ultimately contribute to Australian economic growth.

Innovation and regulation

Time is of the essence in order for Australian businesses to take advantage. As with any new innovative sector competition is rife and other countries are advancing comprehensive regulatory frameworks in order to seize the opportunity.

Australia is currently an attractive market for talent, ranking fourth globally in job listings for digital assets, but further delays could see jobs lost and growth stunted.

Calibrating a robust framework that enables market competition and innovation can be a difficult balance to strike. However, when done in consultation with industry participants, consumer protections and growth can go hand-in-hand, providing the clarity and certainty needed to grow an evolving part of the fintech sector.

The Treasury can be commended for taking a consultative approach to the Digital Asset Facility framework but we must take the next step and develop legislation.

A path forward

There is no doubt Australia is on the right track. However, as we begin to see a more sophisticated crypto ecosystem develop, we need to keep our feet on the pedals to ensure we are swiftly embracing this economic opportunity.

Responsible industry players, such as Kraken, have an important role to play in continuing to share their industry expertise with policy stakeholders to enable proportionate and targeted regulations. With a clear regulatory framework in place, Australia can fully harness the potential of digital assets and seize the truly once-in-a-lifetime opportunity for our nation to become a global leader in the future of finance.

This article was developed in collaboration with Kraken, a Stockhead advertiser at the time of publishing, and was written by Kraken managing director for Australia and rest of world Jonathon Miller.

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