Regulation
$7.5 million for regulation of cryptocurrencies and digital assets in budget
The last two federal budgets were deprived of mentions of cryptocurrency and blockchain. This year has been a little different, with the government investing $7.5 million in a regulatory framework that includes digital assets.
If you search for “cryptocurrency” or “blockchain” in the 2024-25 budget documents, you won’t find anything. However, they have a small glimpse via the fintech space.
According to the budget, the federal government sets aside $7.5 million over four years (and $1.5 million per year thereafter) to “modernize financial services regulatory frameworks to improve competition and protection of consumers for the services made possible by new technologies.
This will include the development and consultation of laws relating to licensing and regulation of platforms that “hold digital assets and reforms related to progress, including continued exploratory work on central bank digital currencies, tokenization of assets and decentralized finance.
It is important to note that this is shared funding, meaning that the $7.5 million will not be specifically earmarked for cryptocurrency regulation. Part of this will also be spent on the regulation of payment service providers and a mandatory electronic payment code. This will include digital wallets and electronically stored “value providers”.
SmartCompany understands that the Government plans to consult on the legislative exposure draft relating to digital asset platforms by the end of 2024. The consultation process will be open to public submissions, with the Treasury working with regulatory bodies. industry, consumers and regulators to help shape the regulatory framework. .
This follows the government’s “digital asset regulation platforms”. consultation which ended in December 2023.
“The proposed regulatory approach focuses on digital asset service providers who hold people’s digital assets, rather than the token itself. This minimizes the exploitation of regulatory loopholes and is designed to accommodate a future where an increasing number and variety of products are tokenized. we read in the newspaper.
In the Australian cryptocurrency community, reactions to the budget have been mixed. While the regulation has been welcome, some want the sector to receive more attention from the government.
“It’s surprising not to see more support for crypto or blockchain other than the $1.5 million a year to be shared across a range of major activities, from advising on legislation to exploratory work on technologies like CBDCs, asset tokenization and DeFi,” Josh Gilbert, markets analyst at eToro, told SmartCompany.
“This sector has been deprioritized for the second year in a row despite the recent Bitcoin halving, significant interest from retailers and institutions buying the asset in huge quantities. Blockchain may not make the headlines on a daily basis, but innovation continues to evolve at a rapid pace.
Crypto exchange platform Kraken said regulatory uncertainty around crypto has hurt its adoption.
“We have been encouraged by the Federal Treasury’s development of a regulatory framework for the industry that works in harmony with existing regulations around the world,” Kraken Australia managing director Jonathon Miller told SmartCompany .
“Implemented correctly, the Treasury framework will provide an additional layer of certainty to drive growth of the local crypto industry, increase investment and high-skilled job creation, and enable Australian investors to make decisions informed about their wealth creation strategies that include crypto assets as part of a broader portfolio.
Our opinion
The regulation of cryptocurrency platforms has long been a source of concern in Australia, particularly due to the plethora of scams in spacethe impact of FTX debacleand the ripple effects caused by collapse of Silicon Valley Bank (SVB) due to its exposure to cryptocurrencies.
While cryptocurrency isn’t making headlines in the same way it was a few years ago – despite Bitcoin’s rally in recent months – it’s not going away either. As we have seen over the years, interest in crypto comes in waves. It is important to put in place regulations when the general interest is at its peak again to protect consumers.
This is an argument that Labor itself made when attacking the Liberal government’s treatment of crypto.
“The previous government dabbled in crypto politics but we have never taken the time to future-proof our regulatory frameworks to protect consumers and guide this new emerging asset class,” Jim Chalmers and Stephen Jones said in a joint statement in February 2023.
“We are moving quickly and methodically to ensure consumers are properly protected and true innovation can thrive. »
It should be noted that in the Budget 2020-21The Coalition offered $6.9 million over two years for “industry-led pilot projects to demonstrate the application of blockchain technology to reduce regulatory compliance costs and encourage broader adoption of blockchain by Australian companies”.
In comparison, this is the first budget since Labor took office to mention digital currencies. Almost two years since Labor came to power, we are still waiting for these important safeguards. During this time, we saw ASIC take on two cryptocurrency platforms – Block Winner And Win from Finder — for allegedly offering financial services products without a license, the first being fined and the second having the charges were dismissed by the Federal Court.
We knew from Labor’s symbolic mapping exercise that it was seeking “fit for purpose” regulation that takes into account all the complexities related to digital assets used across borders. It is not an easy task. But as we have seen time and time again, this is an easily exploited and highly volatile area with the potential to cause enormous financial damage.
We saw this in 2022 when the stablecoin UST Terra collapsed, wiping out $20 billion overnight.
Hopefully by the time the 2025-2026 budget is presented, we will no longer be talking about the possibility of regulation.
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