Senate Crypto report: What was recommended and what does this mean for Australians?
Everything you need to know about Senator Andrew Bragg's plan for bringing crypto to the mainstream.
This week the Senate Select Committee tasked with making Australia a "technology and financial centre" released its much awaited report looking at how cryptocurrency should be regulated. The 168 page final report does not make for light reading but it's clear that the committee sees a strong future for cryptocurrency in Australia. Senator Andrew Bragg, the chair of the committee, was strong in his belief that Australia "can be a leader in digital assets".
In this article we run you through the key recommendations from the report and outline what this means for you right now.
What has been recommended?
The committee made a number of recommendations including:
- Introducing a new market licensing regime for Digital Currency Exchanges
- Introducing a new custody regime for digital assets
- The Treasury undertaking a token-mapping exercise against existing regulation
- Creating a new "Decentralised Autonomous Organisations" entity type in corporations law
- Clarificaiton on Anti-Money Laundering and Counter Terrorism financing regulations
- Amending the tax rules around cryptocurrency to clarify when capital gains or losses are realised
- Introducing company tax incentives for companies using renewable energy for crypto mining
- The Treasury running a review into the issuance of a retail Central Bank Digital Currency
- Introducing clear procedures for businesses that have been debanked
- Replacing the Offshore Banking Unit with a Global Markets Incentive
Broadly, the recommendations all point towards the need to treat cryptocurrencies as something different from existing financial instruments. This stands in contrast to any current attempts to apply traditional financial regulations to digital currencies.
The key recommendations here are around creating new licenses for businesses that operate in this sector. The specifics on this are unclear but it looks like the barriers to entry will be higher for the businesses that are operating in this sector. Broadly, this will be good news for consumers who will be better protected once these new rules are introduced.
One of the more interesting recommendations is the call for the introduction of a so-called "Decentralised Autonomous Organisations" (DAO) entity type. This is a nod from the Committee towards the potential that it sees in Decentralised Finance (DeFi) that it says could "replicate or supersede traditional financial services and products, by utilising a decentralised structure that removes the need for intermediaries and centralised control". This is very futuristic thinking and, if passed, would make Australia one of the few places in the world where this type of organisation can exist.
Another interesting recommendation is the call for tax incentives for crypto mining businesses that use renewable energy. The environmental impacts of the energy intensive practice of mining cryptocurrencies like Bitcoin is well documented. The Select Committee acknowledges this through this tax incentive which could bolster two Australian growth industries in renewable energy and cryptocurrency at the same time.
What does this mean for Australians?
Right now, not very much. These recommendations are not yet law and it will not be an easy process to get them signed off. Senator Bragg said he believes that he can have them legislated within 12 months but this is probably the best case scenario.
It will be particularly hard for the Committee to get approval for things like the introduction of a DAO entity type as this will require changes to the Corporations Act which is notoriously difficult to do. There are also lots of details that still need to be finalised around what the new licensing regimes will look like and it will be difficult to get agreement here.
The fact that there will be a federal election in the next 7 months is a further complication that could impact these proposals further, particularly if a new Government is voted in.
This all means that the rules for Australians that hold cryptocurrencies will not be changing immediately. However, it is fair to say that there is a level of support for cryptocurrency that did not exist previously from the Morrison Government. The direction of travel has been set from a policy perspective so we might see bodies such as the Australian Tax Office (ATO) releasing new guidance in the coming months.
Disclosure: The author owns a range of cryptocurrencies at the time of writing