So far, 2020 has been a year of cryptocurrency regulation: The European Union, the United Kingdom and Singapore have officially introduced their approaches to the burgeoning industry. Now, Australia has published its national roadmap, hoping to become a global blockchain leader.
Last Friday, Australia’s Department of Industry, Science, Energy and Resources launched the national blockchain roadmap — a 50-page document that defines how blockchain technology could benefit the local economy over the next five years.
The paper, developed in conjunction with industry participants, oversees a number of specific fields where the technology might prove useful, namely Know Your Customer-related procedures and wine export. What does this mean for the local cryptocurrency and blockchain industry, and how has the Australian government been regulating it so far?
“Sensible, watchful stance”: What crypto regulations has Australia introduced so far?
Prior to the roadmap’s launch, the Australian government had already taken measures to regulate cryptocurrencies, namely in the context of digital asset trading. In April 2018, the Australian Transaction Reports and Analysis Centre, an agency that primarily deals with tax evasion, money laundering and other forms of financial crime, implemented new regulations for digital currency exchange operators in the country.
The document required them to register with the authority and maintain a compliant AML/KYC policy. That event is mentioned in the newly issued roadmap. “Australia was among the first countries in the world to introduce AML/CTF regulation for DCEs,” it reads. “The regulations have been welcomed by DCE providers and are helping to improve trust in cryptocurrencies.”
Adrian Przelozny, CEO of Sydney-based crypto exchange Independent Reserve, confirms that market participants were generally satisfied with that provision. He told Cointelegraph:
“The regulations imposed by AUSTRAC were implemented after a robust industry consultation period and have generally been welcomed by the Australian crypto industry.”
However, Przelozny specified that running a cryptocurrency business is not easy “in a broader sense,” referring to hidden challenges related to stable banking solutions, regulation and compliance.
“From a regulatory perspective, Australia is a relatively permissive jurisdiction,” Asher Tan, CEO of Australian crypto exchange CoinJar, summed up in a conversation with Cointelegraph, thereby echoing Przelozny’s sentiment.
As for other crypto regulatory initiatives that have been undertaken in Australia, in July 2017, the Department of the Treasury removed the double taxation of good and services tax on digital currencies, hence treating them “just like money” in that regard. Prior to that, cryptocurrency users had to pay GST twice: once they bought a digital currency, and once again when purchasing goods and services subject to the GST. “The Government will make it easier for new innovative digital currency businesses to operate in Australia,” the summary published on the government’s website read.
More recently, throughout 2019, the Treasury researched the opportunities and risks associated with initial coin offerings in Australia, and how such offerings should be taxed, although no concrete reforms have been introduced by the agency in that field so far. Instead, ICOs in Australia are regulated by the Australian Securities and Investments Commission, which oversees them under the Corporations Act 2001 and the Australian Securities and Investments Commissions Act 2001.
Moreover, in 2019 the Australian Taxation Office published a guidance framework on the taxation on cryptocurrencies. Essentially, it defines Bitcoin (BTC) and other cryptocurrencies as forms of property that are taxable. The agency’s deputy commissioner Will Day has also explicitly stated that tax evasion via cryptocurrencies is “not a victimless crime.”
The newly issued roadmap also recognizes cryptocurrencies, as they are directly mentioned numerous times. Moreover, the report does not draw a clear line between digital assets and blockchain technology, although the technology itself is clearly prioritized in the document.
According to Alex Sims, an associate professor at the University of Auckland Business School and research fellow at the UCL Centre for Blockchain Technologies, the Australian government has taken “a sensible, watchful stance” toward cryptocurrencies.
In an email exchange with Cointelegraph, Sims stressed that the Australian Senate referred an inquiry about digital currencies to the Senate Economics as early as 2014, suggesting that the country had started researching the topic long before the 2017 mania. She also argued that some of the government’s reforms seem relatively crypto-friendly:
“The Australian Government actually encouraged the use of cryptocurrency by removing GST when cryptocurrency was purchased. As the Roadmap shows, it isn’t unduly concerned that Australian businesses are accepting cryptocurrency as a form of payment.”
Australian politicians seemed even more enthusiastic about blockchain. As the local prime minister, Scott Morrison, said back in 2017, his country was “strongly pursuing” the technology. The new roadmap largely confirms that aspiration.
National Blockchain Roadmap: a five-year plan — wine export is a priority
The recent release of the national blockchain roadmap followed a near year-long preparation. In March 2019, the minister for Trade, Tourism and Investment, Simon Birmingham, and the minister for Industry, Science and Technology, Karen Andrews, jointly announced the development of a national blockchain roadmap with a boost of around $71,200 (100,000 Australian dollars) in funding from the federal government to make Australia a global leader in blockchain.
On Feb. 7, 2020, the document was published, aiming to promote Australia’s nascent blockchain industry. The country’s wine, banking and finance industries have been selected as the key priority sectors. According to Minister Andrews, the roadmap will pave the way for researchers, startups and policymakers in the blockchain sector, which is set to be worth around $175 billion.
Per the roadmap’s highlights, the blockchain has the capability to strengthen export opportunities, enabling domestic manufacturers to trace their goods in supply chains and agriculture, specifically when it comes to the wine industry. Australian wine is one of the most profitable export products in the country. In 2019, Australia’s wine export volume reportedly grew by 3% to $1.9 billion.
“As blockchain is an incorruptible digital ledger, it can be beneficial for many industries that require ‘record-keeping’ due to its immutability and transparency,” Leigh Travers, executive director at Australia-based DigitalX Limited, one of the first cryptocurrency firms to be traded on a major stock exchange, told Cointelegraph, adding:
“Blockchain will, and in a way already is, transforming the agricultural industry by tracking produce from farm to plate.”
The value of KYC
There is also a strong focus on the sharing of KYC information that allows transmitting results of KYC checks “securely, at speed and with the highest level of confidence.” The roadmap’s authors cite a report written by Big Four firm KPMG that suggests 80% of KYC/AML resources are spent on information gathering and processing rather than on estimating actual risk — and argues that blockchain technology will significantly cut costs and ease communication in that regard.
In addition, the document seeks to set up the National Blockchain Roadmap Steering Committee and “establish a collaborative model comprising working groups of industry, the research sector and government to progress analysis on the next use cases.”
Essentially, the roadmap is Australia’s entry into the global blockchain adoption race, Dr. Jemma Green, co-founder and executive chairman at Power Ledger, an Australian blockchain-enabled energy trading platform, told Cointelegraph:
“To date, more than $26 billion has been raised in capital markets for blockchain companies, and Australia has received less than 1% of this. Australia’s startup capital markets are already challenged and addressing regulations to make Australia a destination to base blockchain companies — essential to getting a bigger piece of the capital raising pie […] If decisive action isn’t taken, then the blockchain Googles and Apples of tomorrow will be based outside of Australia.”
Some experts are not impressed with the new roadmap’s content, however. In an email sent to Cointelegraph, Cal Evans, founder of compliance and strategy firm Gresham International, argued that Australia’s blockchain strategy isn’t extensive enough:
“Australia could benefit with the deployment of blockchain in so many industries. There are numerous industries that can be government-lead including medical, transport and defense. Focusing on the wine industry feels more like the government of Australia is honestly unsure of blockchain and does not want to testbed it in a key area (such as transport or defense).”
Similarly, FinTech Australia chairman and member of the federal government’s fintech advisory group Alan Tsen told the Australian Financial Review that the roadmap “lacked vision,” while the “use cases read like they had been written by a consulting firm,” adding:
“The most disappointing element was the regulatory analysis. It hinted at a few areas that could be further developed but didn’t suggest how this could be done or what should be put on the road map of regulatory change.”
Nonetheless, most Australian blockchain industry representatives, Green included, are satisfied with the new document — after all, it has been developed collaboratively with industry, university and government representatives. As Katrina Donaghy, co-founder of a local blockchain startup Civic Ledger, told the Sydney Morning Herald, over 150 startup members showed up in person to consultation meetings, which apparently “shocked” the government. Travers told Cointelegraph:
“We were fortunate to have the CEO Nicholas Giurietto of Blockchain Australia contribute heavily to the roadmap. He said to me this morning ‘It’s everything we wanted,’ so I am so pleased that the industry contribution was acknowledged and delivered to by the National Government.”
Despite Andrews’s previous claims that the roadmap will entail a boost of around $71,200 in funding from the federal government, no such figures are mentioned in the document. It does state, however, that the Australian Government “has invested in a wide range of blockchain-related activities to date.”
“There was a Labor Party pledge for AU$3 million to invest in blockchain, but their election pitch ultimately wasn’t successful,” Travers of DigitalX told Cointelegraph when reminded that the government has ostensibly not yet allocated any funds to blockchain roadmap implementation. He went on to add:
“With the Blockchain APAC conference coming up in April, there will be a strong focus on establishing a financial link to the blockchain academy, and it’s clear there is a commitment to the technology in Australia.”
Blockchain roadmap without a framework to lean on — how efficient will that be?
Essentially, the roadmap is a consultation document, or a guide to action, but is not as obligatory as a regulatory framework would be, Konstantinos Stylianou, assistant professor of competition law and regulation at the University of Leeds, explained to Cointelegraph:
“The national blockchain roadmap is an aspirational document that lays out the government’s vision on how to maximize blockchain’s promise for the country. It is not binding, and it does not contain specific actionable points, just general steps and priorities.”
In Stylianou’s view, Australia’s blockchain strategy “is more or less” aligned with those of other countries, like Germany or the Netherlands, and it lists targets that are “hard to disagree with,” like an increase of investments, maintenance of competition, respect for privacy and so on. However, he is not certain that it will make a drastic difference without proper legal backup:
“Things like blockchain-friendly finance regulations, legal certainty on smart contracts and whether cryptos are property, public-private partnerships etc. can be catalytic in accelerating blockchain adoption, and we’re not seeing much of that yet.”
Some local industry participants would agree with that statement. Tan, CEO of CoinJar, argues that the roadmap is a great step forward for the industry, adding: “However, immediate action is still needed in order to push through meaningful legislation that can provide certainty and allow for Australian blockchain innovation to flourish.”
Nonetheless, other Australian industry participants seem confident about the roadmap as is. “With the rapid changes to the industry with DeFi, security tokens and international policy amendments, it is impossible to have a clear regulatory framework for this industry today,” DigitalX’s Travers said when asked whether he would prefer to see a definitive framework instead of a roadmap.
“The roadmap is a positive development,” agrees Green from Power Ledger. “It focuses on areas key to building a strong foundation for blockchain adoption — regulation, skills capability, innovation and collaboration.”
Given that the Australian government had already introduced some basic regulatory measures for crypto by the time the national blockchain strategy was unveiled, it seems that it could indeed help the country to assert itself in the global blockchain race — but the limited number of use cases suggests that the plan might be ultimately insufficient or incomplete.
Meanwhile, the fact that cryptocurrencies are mentioned in the roadmap seems to confirm that it is not an extreme “blockchain-before-Bitcoin” kind of case where the government completely shuts down all digital assets, which is advantageous for Australia’s many crypto businesses.