A Parliament-mandated report recommends that Australia create a new regulatory regime for crypto assets to bring business ashore and help it compete with Singapore and the United Kingdom.
The extensive study, published on Wednesday, called on lawmakers to make sweeping changes to encourage more crypto businesses in the country, and to ease legal pathways that prevent businesses from accessing regular banking services.
The report highlights tensions between policymakers around the world as they try to balance protecting investors and seizing a share of the fast-growing crypto industry.
Among the changes it recommended included a new type of market license for cryptocurrency exchanges, a clear framework for asset custodial and new corporate rules covering new projects in decentralized finance, or DeFi. The report, which was commissioned in March, is expected to provide a framework for domestic crypto legislation next year, possibly after the election.
“What we don’t want to do is put a new coat on an old hook,” said Andrew Bragg, a New South Wales senator who chaired the committee that prepared the report. “There is a strong anti-competitive element in Australia where incumbents do not like innovation and the solution they offer is to push new ideas into old regulatory frameworks that are designed for something else.”
“The agenda here is to try to be as good as Singapore or the UK. We want to be a leading global crypto jurisdiction,” he told the Financial Times.
Bragg, a former organizer, added that he was confident he would have support for his recommendations.
Australian consumers are increasingly comfortable with owning cryptocurrencies as their value has boomed in the past two years.
A study by YouGov, crypto exchange Swyftx, last month found that more than a third of all Australians under the age of 50 own or own digital assets such as Bitcoin and Ethereum. This puts them among the largest users of crypto-assets in the OECD group, the report said. The Queensland Investment Corporation (QIC), one of Australia’s largest pension funds, said it may make small investments in the sector.
However, this growth has been accompanied by a growing concern among authorities that many crypto companies are operating in offshore jurisdictions. Among the local firms that have sought approval from overseas regulators are Sydney-based Independent Reserve and Melbourne-based CoinJar, which were awarded licenses in Singapore and the UK respectively last month.
“The more that happens offshore, the more parts that migrate offshore . . . especially if they can’t restore incentives in Australia. It’s very strategically important to have that ability ashore and have a strong digital economy,” Bragg said.
Asher Tan, CEO of CoinJar, said his company’s decision to open in the UK was more practical. “It was mostly because it was a bigger market,” he said.
The Bragg report recommends a new type of market permit for cryptocurrency exchanges and will cover capital adequacy and responsible person testing. It also proposed rules covering so-called Decentralized Autonomous Organizations (DAOs), a loose company whose rules are automated or developed by consensus among members.
“DAOs do not clearly fall within any of the corporate structures established in Australia. Legal liability for [token holders] For these organizations it is not clear at the moment, and this regulatory uncertainty prevents the creation of large-scale projects in Australia,” the report said.
He cited standards in the US state of Wyoming as a possible model.