The Australian government’s current Senate paper on digital asset legislation is a pro-cryptocurrency declaration of purpose that the rest of the world may benefit from. The Australian Senate Committee as a Technology and Financial Center issued its long-awaited advice on cryptocurrency regulation in October 2021. The resulting report’s 168 pages are broken down into twelve recommendations to find the correct equilibrium between establishing legitimacy and inhibiting innovation.
This is ground-breaking research that highlights Australia’s concerted attempts to position itself at the stage of international cryptocurrency investment. The Committee’s chair, Senator Andrew Bragg feels that Australia could be a forerunner in cryptocurrencies and compete with Singapore, the United Kingdom, and the United States.
Four Major Recommendations
First, a slew of novel cryptocurrency-specific licenses and rules will be implemented. Authorities worldwide have Attempted to fit a square peg (cryptocurrency) into a round hole for far too long (traditional monetary regulations). This method ignores the underlying disparities and the power of crypto assets to change the world.
The potency of cryptocurrencies is recognized in this paper, which asks for a variety of specialized cryptocurrency permits in Australia. It proposes a specialized market licensing scheme for cryptocurrency exchanges and a specialized digital asset storage scheme. Details would have to be worked out, but assuming we could get these foundations right, it would give the industry the credibility it requires to enter the mainstream.
Second, Australian company law now recognizes a DAO entity form. This suggestion is significant because it demonstrates the Australian government’s willingness to embrace DeFi and cryptocurrency innovation. Wyoming is the only location I’ve heard of that has something similar in place so that Australia can be ahead of the game. DAOs, if authorized, might offer a distinct benefit that can propel the Australian economy into a decentralized future a generation ahead.
Nevertheless, because modifications to the Corporations Act are notoriously scarce in Australia, this would be the most challenging issue for the Committee to approve. On the other hand, Senator Bragg is the only one who could accomplish it.
Third, tax laws for cryptocurrency-to-cryptocurrency transactions have been modified. According to the latest Finder study, more than 17 percent of Australians possess cryptocurrency, making it the world’s 3rd-highest level of implementation. Nevertheless, this expanding team has had to deal with tax regulations that are, at best, perplexing.
Traditionally, the Australian Tax Office has considered cryptocurrency-to-cryptocurrency exchanges a net profit. According to the new guideline, unless there is a discernible financial gain or loss, the tax is imposed. The devil would be in the details on this one once more, yet effective Australian cryptocurrency users may be the victors.
Fourth, novel tax incentives are being offered to motivate green cryptocurrency mining. The Committee proposes a ten percent tax break for cryptocurrency mining companies using renewables. This appears to be a wise decision to assist two rapidly growing Australian industries: renewables and bitcoin. This would be particularly necessary as the Committee works to achieve these proposals approved against the context of COP26 and growing global warming worries.
Three Difficult Issues
Timetables for enacting recommendations. They’re simply suggestions presently, and they’re only valuable more than the political resolve to put them into action. Like in other places, politics in Australia crawl, and this would be no exception. Senator Andrew Bragg is sure that he could get all of the proposals passed in a year, and I am rooting for him to succeed. Nearly a third of Generation Z already owns cryptocurrencies, so a rising belief can aid his campaign that digital currency innovation can be a vote-winner with younger Australians in the upcoming federal election.
Consequences for cryptocurrency enterprises in the lead-up to the reforms. There are also uncertainties regarding what cryptocurrency firms may do if new rules take a year to pass. Several submissions requested a “safe harbor” from regulation until the regulations were established; however, the Committee did not expressly suggest this.
However, the path has been laid, and there is widespread support for cryptocurrency innovation and recognition that new regulations and permits are required. Before then, I doubt we will see much more in regulatory changes.
Details on the proposed licensing and tax proposals. Several of the suggestions were vague, and it appears that the Australian Treasury would then take charge of these issues. The sector is eager to learn about the necessities for becoming a trustee or cryptocurrency exchange, especially in terms of capital requirements.
Companies would relocate abroad when there are too many burdensome regulations. Consumers would also require additional clarification on what constitutes a particularly identifiable capital gain or loss for tax reasons. In several respects, the task has already begun.
Insights for Governments Worldwide
The cryptocurrency sector is prepared to discuss policy. This Select Committee was swamped with submissions from cryptocurrency firms, universities, trade groups, and regulators. Over one hundred written contributions were received, and 3-days of public meetings were held. It’s unusual for a sector to request additional regulation, but that’s what is occurring here. The cryptocurrency sector worldwide is looking for clarification and is willing to engage in a policy discussion.
Siloed techniques are less successful than broader evaluations. One of the reasons for the high level of participation in this consultation was that it examined the digital asset market holistically instead of from a single perspective. Regulators’ willingness to look at cryptocurrencies from their regulatory perspective is an issue we’re witnessing worldwide, but broader innovations ought not to be judged through this restricted lens.
This consultation was able to take a broad view of the sector while yet delving into particular difficulties. I’d like to see more reviews like this all across the world.
Bespoke digital assets management strategies would be required. Digital assets have struck crucial speed, and the transformation could no more be ignored. Modifications to historical financial services policies on a piecemeal basis would not work. We require officials worldwide to collaborate to develop tailored, ideal regulations. Coinbase expresses this effectively in one of their dApp.
The dApp proposes a conceptual platform for the way we regulate digital assets, which would guarantee that development may happen without being delayed by the challenge of migrating from our old market structure. These suggestions from Australia are an effort to achieve just that, and several others could learn from them.
One thing is certain: the world’s evolving. This Australian Senate Committee should be commended to take a comprehensive strategy and propose tailored policy tools. It’s past time for politicians worldwide to join and rethink their approaches to digital assets.
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