Senate Crypto Inquiry Recommends Laws To Make Australia A Hub Of Digital Innovation

A Senate inquiry recommended changes to tax laws, licensing and regulatory regimes to encourage digital and crypto-asset businesses to locate in Australia.

The Select Committee on Australia as a Technology and Financial Center was created to look for ways to regulate crypto and digital assets, which are currently largely unregulated.

The committee made 12 recommendations that included new market licensing regimes for digital currency exchanges (DCEs), custody and depository services, and changes to anti-money laundering and funding guidelines. terrorism so that they are “fit for purpose”.

During the investigation, he heard that the crypto and digital asset industry has limited regulatory oversight, despite some exchanges handling billions of dollars in transactions per year.

Currently, the only requirement to operate an ELD is to register with the anti-money laundering regulator AUSTRAC, which was described in the survey as having a “light touch.” AUSTRAC is not involved in investor protection.

In response to industry calls to abolish the Capital Gains Tax (CGT) for digital currency transactions, the committee recommended that the CGT be applied only “when there is a surplus. value or a clearly definable capital loss “when a transaction takes place.

However, he did not specify what the threshold should be to trigger such tax considerations.

It has also been recommended that a 10% tax cut be applied to companies that source renewable energy to ‘mine’ cryptocurrency.

Liberal Senator Andrew Bragg chaired the Senate inquiry into how to regulate cryptocurrency and other digital assets.(ABC News: John Gunn)

Committee chair, Liberal Senator Andrew Bragg, said he believed the recommendations struck the right balance between encouraging innovation and protecting consumers.

Despite the impending federal election, Senator Bragg has said he wants the proposals to be legislated within 12 months.

“I’m really concerned about the brain drain and the loss of good people because you are already seeing Australian crypto markets looking for licenses overseas,” he said.

Welcome report but “light on the details”

Aaron Lane of the RMIT Blockchain Innovation Hub said the report was forward thinking and was an important first step.

“The longer we leave it, the more we fall behind, especially the American type of crypto-friendly jurisdictions like Singapore,” Dr Lane said. “There is some urgency about this.”

Nick Abrahams, of Norton Rose Fulbright, said the report did not contain enough details.

“The report didn’t go into enough detail about how to regulate digital assets… And, so, what the report did was really kick the box with that and said [it] is going to be a symbolic mapping exercise, ”he said.

“A symbolic mapping exercise feels a bit like looking in the rearview mirror, when we should be looking through the windshield.”

Venture capitalist Mark Carnegie welcomed the report but had doubts about implementing its recommendations.

“The speed at which we are actually trying to implement regulatory changes and the speed at which this technology in this environment is evolving is coming from different universes,” he said.

Decentralized autonomous organizations, a “game changer”

The industry is very excited about the committee’s recommendation for the federal government to establish a new corporate structure of decentralized self-organization.

“This is an important question. If passed, it will be the most significant corporate law reform in two decades,” said Dr Lane.

Decentralized Autonomous Organizations (DAO) are common law partnerships, unions or unincorporated associations whose activities and investment decisions are coordinated by code or smart contracts.

Caroline Bowler, Head of BTC Markets.
Caroline Bowler says people are turning to crypto amid the economic instability brought on by the pandemic.(Provided)

Currently, DAOs – and other blockchain projects with decentralized governance structures – are not recognized under existing regulatory categories under Australian law.

BTC Markets digital currency exchange chief executive Caroline Bowler said the recognition of DAOs will be a game-changer for the industry.

Ms Bowler said DAOs are the fundamental foundation of DeFi, or decentralized finance.

Wyoming in the United States legally recognized DAOs this year, and it has quickly become a hub for digital asset companies.

“DAOs are a whole new paradigm, a whole new way of thinking about organizational structures,” Ms. Bowler said.

“It’s really very ambitious for Australia to tackle this.

“It would really disrupt financial services. The big banks will have real competitors in the room, and consumers will have a choice.”

‘De-bank’

The committee made no recommendations to prevent banks and other financial services companies from banning cryptocurrency activities.

Instead, he wants the relevant agencies to act by putting in place due diligence requirements for banks and a clear process for businesses that have been de-banked to seek redress.

“My point is that we shouldn’t be forcing banks to bank any particular company or person, but what we need to do is solve the problems and take the excuses off the table. [with a new licensing system for crypto and digital asset businesses], said Senator Bragg.

The report also does not recommend changing laws to allow financial advisers to give advice on cryptocurrency, which the submissions to the inquiry had requested.

“If you’re a smart investor, you can get all the advice you want in the world. And if you’re a retail investor, there’s absolutely no way you can get decent financial advice because no regulated financial advisor is allowed to give advice on cryptocurrency, ”Carnegie said.

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Norman D. Briggs