When I opened the Senate inquiry into cryptocurrency in March, it was a lonely crusade.
Sky News host Laura Jayes summed up the sentiment when she put it to me that some perceived cryptocurrency as associated with “scammers and criminals”.
Australia has a chance to be a leader in the new crypto economy.
Some wondered why I was pursuing an area which seemed so obscure. In the mind of many in Canberra, crypto was associated with the badlands of the internet, and was about as far removed from the legitimate reform agenda as you could get.
I always felt this critique missed the point. I am interested in the utility of the technology and how it could benefit the economy, as opposed to focusing on the personal investment lens.
Some wondered why I was pursuing an area which seemed so obscure.
I am not interested in the price of any particular coin, such as bitcoin. I am interested in the economic opportunity of the technology.
Fast-forward to today, the narrative has shifted dramatically and the potential for Australians is undeniable. The Treasurer Josh Frydenberg has outlined the most ambitious payments system reform in 25 years with crypto as a centrepiece. Frydenberg’s plan will make Australia a crypto hub, but it will also protect consumers.
Frydenberg largely adopted the Senate’s plan as well as the plans put forward by payments law expert Scott Farrell.
A report from EY, commissioned by crypto miner Mawson Infrastructure, spells out the very tangible opportunities for Australia if we embrace this reform agenda.
The first major takeaway from EY’s report is that 28.8 per cent of Australia either own or are likely to own cryptocurrency. This echoes research from FinTech company Finder, which found that 17 per cent of Australians own cryptocurrency, and a further 13 per cent say they plan on buying cryptocurrency in the next 12 months.
Australia can benefit enormously. Adopting this reform agenda, which draws on those implemented in other jurisdictions – from Singapore to the US state of Wyoming – could see Australia become a major international hub.
This is part of a transformation in our payments system. As the Treasurer said last week, the global crypto-asset market is now worth $2 trillion, and, combined with payments policy, has become a major economic lever.
This isn’t just a question of economics – it is also a question of strategic imperatives. If we don’t have oversight, then it will be under the control of another country.
The benefits to our economy will be significant. Right now, this sector employs 11,600 workers. This modelling sees the sector employing 205,700 workers by 2030 – a 17-fold increase.
The sector provides $2.06 billion in economic activity. By 2030 we could see that balloon to $68.4 billion.
For this to happen, we must implement Frydenberg’s plan with care. Our dual guiding principles should be to provide consumers with adequate protection and investors with certainty and confidence.
The new legal framework must have flexibility as a feature, not a bug. We need to leave space open for innovation which we have not yet anticipated, but we also need firm guardrails to prevent abuse.
This is why systems of licensing, minimum standards, and legal recognition can provide sufficient oversight and certainty while allowing for the government to adapt to changing circumstances.
The recommendations of the Senate’s report, if properly implemented, can strike that balance.
The Treasurer has committed to finalise consultation on licensing for crypto markets, a custody regime by mid-2022.
By the end 2022, the Treasurer will complete the examination of decentralised autonomous organisations – a revolution in corporate law designed to empower individuals with big ideas.
By this time, we will have received advice from the Board of Taxation on the appropriate framework for taxing these assets.
We must meet these timelines and try to accelerate if we can. The Treasurer has asked me to assist in the implementation of these reforms. I will be keeping my foot on the accelerator.
If Australia doesn’t act quickly, we will rapidly lose ground, and see homegrown innovators head offshore. In just the past month, we have seen homegrown DeFi Trovio merge with TCM to form an entity which will be based in Singapore.
Investor Mark Carnegie has made similar points about setting up camp in Singapore. What a shame for Australia and Australian workers.
Abroad, governments are keeping up the pace. Singapore remains a market leader, with a comprehensive system of licensing for digital asset service providers. Australian companies are seeking licenses in Singapore and moving north.
The USA and United Kingdom are also at varying stages of pursuing their reform agenda.
But the opportunity remains for the taking. Australia has a chance to be a leader in the new economy, instead of scrambling to pick up the scraps in two years time.
We have a clear policy to make this happen. New choices, lower prices, jobs and investment will be the dividend. There is no time to waste.