Crypto regulation: where you’ll want to be in 2022
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On the extreme end, we saw China blanket ban Bitcoin (sending it to an all-time high), whilst the United States’ SEC has taken a far more considered, cautious approach to unblocking the crypto chain.
Over here in Australia, we’ve had the Senate Select Committee’s review take a sensible and clear-sighted approach that’s looking to promote both innovation and adoption of digital currencies.
With the new year upon us, it’s worth your time to examine the report’s recommendations. In the meantime, here’s our take on what the future holds for cryptocurrency in Australia:
We’re urging better guidance so individual crypto-investors can clearly see what is required of them. Outside of your individual obligations, we see the main point of contention for next year, both here and elsewhere, to be Decentralised Autonomous Organisations (DAOs).
These organisations are unintentionally testing the boundaries of existing regulatory frameworks. We need a brand new approach to taxing and regulating these new company structures, increasingly prevalent amongst blockchain innovators. These DAOs are powering the bleeding edge of innovation in our space, attempting to retrofit current regulation to them will just result in pushing them elsewhere.
These call for caution. The existing AML/CTF regulatory environment in Australia has provided a sufficient framework so far, encouraging the growth of strong local businesses as well as attracting global players creating domestic footprints.
This is because Australia has earned the reputation of being a crypto savvy and friendly jurisdiction which goes a long way to ensuring crypto businesses remain onshore. It must be said that the introduction of an onerous market licensing and/or crypto asset custody/deposit regime could risk driving these businesses away.
You don’t need a crystal ball to see the impact of a heavy market licence on the industry: Japan has tried this experiment and it’s resulted in only a small handful of exchanges being able to manage the costs associated with maintaining market licences and those costs are ultimately passed onto consumers. In other words: if it ain’t broke, don’t fix it.
Finally, we welcome the recognition that the majority of crypto assets are akin to currencies in character that we are now seeing in a lot of jurisdictions. Locally, cryptocurrencies have been mischaracterised in Australia for some time.
A deeper, more nuanced understanding of cryptocurrencies seems to be on the cards when we reviewed the Senate Committee’s recommendations, which will help bring us back into line with the rest of the world.
Most notably, recognising its function as a medium of exchange would benefit consumers and industry participants alike.
We’re still at the frontier of cryptocurrency adoption and utilisation. As regulators look to catch up with the industry, we can expect there’s going to be some great input, and some that are a bit of a miss.
But as we look back over 2021, we can see there is a genuine good-faith interrogation of the space by regulators, which is likely to mean we’ll have a strong foundation for the industry in place this time next year.