The Australian crypto industry is up in arms after something extraordinary happened at this year’s Crypto Summit, a conference held by the Australian Financial Review (AFR). An official of the regulator made a statement and a disruptive fire alarm awakened sector-wide apprehensions as to Australia´s stance on cryptocurrency, stating that it is now systemically too big.
A Real and Symbolic Alarm
A peak council of professionals organised the summit in Sydney to stimulate a debate on whether digital money would eventually be allowed to circulate legally here, but it dramatically took a turn for the worse when the fire alarm went off just as one of its highest-profile attendees took the podium. It also stated that many of the crypto assets that frequently turn hands are likely regarded as financial products for which a license is needed to provide the related financial services.
The alarm was false, but it served as a fitting metaphor for the crypto industry’s fears that regulatory “alarms” may cause companies to move abroad. However, this move has raised concerns that it could further strengthen ASIC’s reach and turn Australia into a less conducive environment for the crypto sector.
Ripple Effect on the Industry
Kirkland’s remarks resonate throughout the tents at Crypto Summit as a signalling point to a more aggressive oversight stance by ASIC against the sector. If things were bad enough in the already-regulation-scarce Australia, such additional scrutiny might result in a lack of innovation and growth, hurting the local crypto business.
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Founder of Finder Wallet Fred Schebesta described the regulatory approach as “like charging the Wright Brothers with a fine because they didn’t have a pilot’s licence,” calling for clarity in legal frameworks to avoid stifling innovation. Schebesta made her remarks immediately following Kirkland, right before the fire alarm sounded, giving an extra ironic twist to the whole scene.
Some in the industry have already begun to discuss how these tighter regulations may create compliance headaches for crypto firms. The fact that many companies are already in the process of moving to greener pastures, namely crypto-friendly jurisdictions like Dubai and Singapore (where regulatory clarity is slightly further along), seems predictable. Zodia Custody CEO Kate Cooper said a number of local companies are likely to exit the market because of the regulatory uncertainty, with little new legislation expected until 2025.
Calls for Industry Consultation
The Crypto Summit also pointed out the pressing necessity of a dialogue between regulatory bodies and the crypto sphere to form a just and balanced legal system for the industry. Experts like Michael Bacina, partner at law firm Piper Alderman, argue that leaving it to courts to determine the regulatory landscape, rather than enacting clear legislation, is particularly unwieldy. He compared their approach to the United States Security and Exchange Commission (SEC), a path that has also resulted in litigation surrounding whether crypto assets should be treated as securities.
There is no guarantee that the draft legislation announced in 2023 will be enacted in time for the next Australian federal election. Business leaders are calling for immediate talks with policymakers to ensure any new rules are fair and encourage innovation while not leaving consumers exposed.
Conclusion: An Uncertain Future
The Crypto Summit was a timely reminder for Australia of how nascent our crypto sector is and the minefield of regulatory uncertainty that lies ahead. One might contend that the fire alarm was probably a false one and that it will eventually be turned off; however, the real industry alarm is the rapid regulatory layering. Businesses are looking overseas, and legislation is at a standstill — so dialogue and rules around tech companies will only become more essential. The summit became not only a discussion on the future but also a call to solve urgent regulatory problems before the development of the industry is impeded.
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