Charting a path forward for cryptocurrency regulation in Australia

Australia is behind on cryptocurrency regulation. There is a lot at stake and this has brought the Australian cryptocurrency industry together, as Jonathon Miller, Kraken’s managing director for Australia, explains…

Australians love cryptocurrencies: almost one in four Australians have owned cryptocurrencies, the highest adoption rate globally. Despite this rapid embrace of blockchain technology, we have been behind the times in implementing a regulatory framework that will govern digital assets in the long term.

While interest in digital assets in Australia and globally is recovering, the lack of clear regulation could cause us to fall behind major financial markets such as Singapore, Europe and the UK. Regulation, when done correctly, provides entrepreneurs and established industry players with a rulebook to refer to when making decisions, gives investors a better idea of ​​which crypto projects to invest in, and protects consumers from unscrupulous practices.

Shaping the regulation of digital assets in Australia

So, what constitutes good regulation? Earlier this year, Kraken was invited to collaborate with other leading blockchain and digital asset experts in Australia to develop a series of recommendations on how a regulatory framework could work.

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

Recommendations from the Roundtable on Custody and Asset Management

1. Solve the debanking of crypto firms

One of the most frustrating things that individual investors face is the unjustified rejection of services by traditional financial operators, and this also affects trust in the business side of the digital asset industry. Blockchain Australia recommends creating a standard framework for banks to assess risks when dealing with cryptocurrency-related activities, inspired by successful models such as the one in Hong Kong, in order to bring greater trust and certainty to transactions between cryptocurrencies and fiat currencies .

2. Sharing information and mitigating scams

To combat scams, we need to improve information sharing paths 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 more secure crypto transactions.

3. Create a clear token taxonomy

“Crypto” is an abbreviation for a very broad spectrum of thousands of assets. Developing a clear token taxonomy to distinguish between various types of digital assets will go a long way in providing clarity that will help investors make informed decisions as they navigate the cryptocurrency market with greater confidence.

4. Consumer education programs

As an industry, we have much more educational work to do than simply highlighting how to avoid scams. Launching comprehensive consumer education programs covering all aspects of digital assets shouldn’t just be an aspiration, it should be table stakes for any cryptocurrency business. These resources must 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 close the knowledge gap and drive greater adoption of cryptocurrencies.

5. Simplify tax treatment for cryptocurrencies

Currently, cryptocurrency adoption is held back by people who do not understand tax obligations when trading or transacting with cryptocurrencies. Simplifying tax reporting and compliance processes for crypto assets will go a long way in setting the expectations of the crypto community. Clearer tax classifications and a standardized reporting process would make it easier for everyone to fulfill their tax obligations without confusion.

6. Custody

We support clear regulation on custody, focusing on regulators who have direct control over consumer goods. A flexible and adaptable regulatory approach that distinguishes between direct and indirect control of assets will ensure that custody practices keep pace with technological advances and continue to effectively protect consumer assets.

A path forward

The blockchain industry, despite its growing popularity, is still nascent, especially when compared to traditional finance. Regulation that protects consumers while enabling market competition and innovation is a difficult balance, but it will be vital as the economy becomes even more digital.

Slow action or the wrong approach by politicians could risk capital flight and see Australia lose its leadership in a market that is set to be worth
$3 trillion in global trade by 2030. There is a lot at stake and Kraken is proud to contribute to the growth of the industry in Australia.t

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

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

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