Crypto has found a home in Australia. In 2021, 28.8% of Aussies owned some crypto. However, success and growing adoption can add new challenges. We are seeing an asset class grow faster than regulators can feasibly build a regulatory framework.
On August 22, Prime Minister Anthony Albanese's administration announced its plan to address this challenge. The first step involves uncovering the characteristics of each digital asset in use, a process known as token mapping.
The government hopes this mapping will inform its initial consultation paper about what is to come.
The effort alone to pursue a legal framework is very encouraging. Once the crypto sector becomes regulated, it effectively has successfully permeated the financial system. Well-designed regulation simultaneously removes bad actors, dissolves ambiguous regulatory risk, and provides access to institutional adoption.
Australia has also taken the wise approach of tackling policy-design upfront instead of regulating through enforcement. Crypto thrives when institutional buy-in meets thoughtful regulation. In Australia, there is demand for both.
Careful policy design allows the frontier to rapidly innovate whilst defending consumers at the channels of mass adoption. So far, with the support of industry bodies, the Australian government has done well regulating centralized entities while allowing decentralized projects to experiment.
For the wellbeing of both the crypto ecosystem and its contribution to the domestic economy, the government must give decentralized projects adequate time and space to develop. Equally as important, centralized entities must be willing to accept regulation to build the consumer trust and protections needed for mass adoption. However, before writing the rulebook, regulators must understand crypto’s place in the Australian and global economies. Done appropriately, the future is bright.
In a sense, the financial metaverse already exists. The crypto-economy is a secondary borderless economy that is “opt-in” by nature, contrasting starkly with national economies, where an individual's finances are unilaterally manipulated by the central bank puppeteer. The decentralized finance ecosystem gives every person, no matter where they live, access to a second opt-in economy where dilution of ownership or confiscation cannot occur unilaterally.
In a prosperous economy like Australia, crypto represents opt-in access to vibrant experimentation and innovation. But in less fortunate economies, such as in Sri Lanka, the "opt-in" economy is more like an "escape-hatch" economy, a bastion from a collapsing or hyper-inflating currency. In a time where the strengthening US dollar imposes debt-serviceability pressure on other economies, it is a matter of human rights to support access to mechanisms of savings-preservation. Through not just volatile assets like Bitcoin, but also stablecoins, crypto gives overseas individuals the ability to retain access to USD-proxies. This is vital as ownership of USD or other foreign currency is commonly banned during an economic crisis.
Moreover, on the opportunistic side, the development of crypto technology is by default, global public infrastructure. Resilient financial markets take decades to build in national economies. As seen with Australia's brain-drain, talent and successful enterprises flee to overseas financial capitals for listing. Most countries, let alone developing nations, have slim hope of catching up to the established likes of New York, London, Hong Kong, Singapore, etc. The global public infrastructure in the crypto-economy represents an opportunity for countries with less mature financial markets to retain their talent and attract capital by leveraging the global nature of decentralized exchanges and resilient lending protocols as they improve over time.
On both micro and macro levels, embracing this for Australian citizens is pragmatic. Still in the early days of blockchain technology, Australia has a head start on developing leading companies and services, but there is no time to waste. With talk of digital currencies and crypto regulation happening in halls of power around the world, any nation looking to embrace the new era of economics must move swiftly.
Jackson Zeng, CEO, Caleb & Brown
Jackson Zeng is CEO of Caleb & Brown. He also serves on the board of Blockchain Australia where he provides guidance on the organization’s strategic direction and membership alignment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.