On 22 August, a joint statement was released by Treasurer Jim Chalmers, Minister for Financial Services Stephen Jones, and Assistant Minister for Competition, Charities and Treasury Andrew Leigh, announcing that the Treasury would prioritise ‘token mapping’ work to help identify how crypto assets and related services should be regulated.
“Australians are experiencing a digital revolution across all sectors of the economy, but regulation is struggling to keep pace and adapt with the crypto asset sector,” Treasurer Chalmers said.
In a statement, the University of NSW said the move follows increasing government concerns, such as the Australian Securities and Investment Commission (ASIC), about the number of ‘scams’ involving cryptocurrency and the influence of social media on the sector. Reports from the Australian Prudential Regulation Authority (APRA) and Australian Transaction Reports and Analysis Centre (AUSTRAC) warning about the scale and risk management related to crypto assets were also released this year.
Meanwhile, the Reserve Bank of Australia (RBA) is exploring use cases for a central bank digital currency.
Head of the School of Information Systems and Technology Management at UNSW Business School, Professor Barney Tan, said while it might seem unusual that Australia is the first country to take the move, it’s to be expected.
“Australia is typically an early mover in the regulation of new technology. We are one of the first countries to develop an AI ethics framework that provides guidelines on designing, developing, integrating or using AI systems, and the first in the world to exclude ‘high-risk vendors’ from 5G, as a response to security advice,” Professor Tan stated.
According to him, the recommendations of the Senate Select Committee on Australia as a Technology and Financial Centre released late last year aim to strike a balance between encouraging technological innovation and progress and safeguarding Australian consumers of those innovations.
While investors may be concerned about the impact of regulation on cryptocurrency, Professor Tan said there are several benefits to regulation, such as establishing a framework for equal taxation, preventing fraud, and providing more robust investor protection.
“It also could help when it comes to anti-money laundering, engaging in counter-terrorism financing, and preventing other financial crimes. This is about regulating the ‘Wild Wild West’ and protecting investors from themselves, even as they are joining what they see as the gold rush on the cryptocurrency exchanges,” he explained.
Professor Tan further explained that nothing has changed for the investors of established crypto assets as cryptocurrencies such as Bitcoin have been regulated and taxable for some time. He stated that the planned token mapping means that new and emerging forms of crypto assets can be identified, and the government can determine if the existing financial services laws are sufficient or if it needs a special cryptocurrency regulation.
According to Professor Tan, the recommendations set down by the Select Committee on Australia as a Technology and Financial Centre will also affect service providers, digital currency exchanges, issuers of crypto assets, and other businesses operating in the same space.
“The token mapping exercise is not meant to be one-off. It will be ongoing and co-evolving as new forms of crypto assets emerge. Technology could evolve ahead of regulation in the short term, but regulation will also co-evolve so that the objectives of the regulators are met,” he explained.
As mentioned, a regulatory regime has benefits. However, it’s not exactly in line with the principles of cryptocurrency enthusiasts. But Professor Tan said Australia is already much more lenient than other regimes, such as those found in Russia, India, China, and Turkey.
According to Professor Tan, whether other nations follow Australia’s move in regulating cryptocurrency will depend on their attitude toward crypto.
“As a world first, other countries will likely be looking closely at the outcome of this exercise. But in some, less crypto-friendly jurisdictions where crypto assets are banned outright, there is no need to token map as there is already a blanket ban in place. They have already decided that crypto assets offer no societal value, so there is no need for the balance that the Australian regulators are striving for,” he added.
