Big Opportunities for Australia Fintech as New Crypto Regulations Unveiled

Under Prime Minister Anthony Albanese, Australia will review the country’s regulatory sandbox as part of the government’s reforms on cryptocurrency regulations targeting cryptocurrency exchanges and other digital asset platforms.

According to a Treasury document, citing sources close to the development, the government of Australia aims to create a new regulatory framework that will provide greater certainty for industry participants while addressing market integrity and consumer protection.

Play a Greater Role in Facilitating New Products

The review, set to take place later this year, follows a report dubbed the “Enhanced Regulatory Sandbox” underutilized and unable to fulfill its mandate. In the statement about the need to develop an Innovative Australian Digital Asset Industry, the government of Australia observed that sandboxes were increasingly a “core feature of the innovation agenda” overseas and “could play a greater role in facilitating new products and business models.”

In a joint statement from the office of the Treasurer, Assistant Stephen Jones and special envoy for cybersecurity and digital resilience, Andrew Charlton stated that the government would review crypto regulations to foster the industry’s innovative ideas. Their joint statement said:

“We know that digital assets and blockchain represent big opportunities for our economy, financial sector, and payments industry and capital markets […] the government plans to release draft legislation for public consultation later this year, assuming it wins reelection.”

Commitment to Supporting Innovation

The Digital Economy Council of Australia (DECA), on the other hand, welcomed the idea and added it was encouraged by the government’s efforts to engage the digital asset industry and align Australia with international best practice:

“We commend the Government’s commitment to supporting innovation, improving risk management capabilities, and addressing critical and ongoing challenges such as de-banking.”

The proposed review of crypto regulations comes amid Singapore’s and the EU’s efforts to regulate the digital asset industry. The EU will introduce MiCA, and Singapore will extend its Payment Service Act to integrate crypto service providers within its compliance and licensing framework. Before implementing MiCA, the EU had varied financial regulations offering a phased approach similar to the one currently operating in Australia. The government said:

“We want to seize these opportunities and encourage innovation simultaneously by ensuring Australians can use and invest in digital assets safely and securely with appropriate regulation.”

Who’s affected, and who’s not?

According to the Treasury’s statement, the proposed crypto regulations will apply to custody services, cryptocurrency exchanges, and brokerage firms that offer trading and storage of cryptocurrencies. Additionally, all firms offering tokenized stored-value facilities, including some stablecoin issuers, will be subject to licensing and compliance obligations. Nonetheless, companies involved in creating and using crypto assets for non-financial purposes, software developers, and those maintaining crypto infrastructure will not be affected. The statement said:

“Dealing or secondary market trading in these products will be not treated as a dealing activity, and platforms where they are traded will not be treated as operating a market simply because of that trading activity.”

Conclusion

The Australian government’s publication of the new crypto regulations framework shows that, just like in the US, crypto is poised to play a significant role in the upcoming federal elections. Recent research shows that over 3.9 million Australians hold some form of cryptocurrency, and at least 59% of them said they would vote for a party that is most pro-crypto. Only time will tell whether the well-articulated plan for regulatory clarity will influence voters’ direction during the coming elections.

Frequently Asked Questions (FAQs)

How is crypto regulated in Australia?

Australia has no specific regulations dealing with blockchain or other distributed ledger technology (DLT).

Is Australia a crypto-friendly country?

The government partners with blockchain firms to ensure compliance while fostering growth and offers crypto firms a regulatory sandbox. Additionally, the government has specific tax policies that benefit crypto traders and investors.

How is crypto taxed in Australia?

Cryptocurrency is subject to capital gains and ordinary income tax. Capital gains tax means that when you dispose of cryptocurrency, you’ll incur capital gains or capital losses.

What is crypto classified as in Australia?

Crypto assets are taxed as assets, including for self-managed super funds (SMSFs) investing in crypto assets; rewards for staking crypto are ordinary income for tax purposes.

Appendix: Glossary for Key Terms

Crypto: A type of digital currency that allows people to make payments directly to each other through an online system.

Fintech: A combination of “financial” and “technology.” It describes the use of technology to deliver financial services and products to consumers.

Crypto regulation: Rules and laws implemented by governments and regulatory bodies to govern the crypto asset market, aiming to protect investors and ensure market integrity.

Reference

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