Interpretation of the Australian Senate report: establishing a comprehensive regulatory framework to shape the future of the Australian crypto industry

Recently, the Australian Senate released a final report on the state of blockchain regulation in the country, which is 168 pages long, and provides policymakers with a roadmap on how to best utilize the emerging blockchain industry. A special committee of the Australian Senate, led by Senator Andrew Bragg, is a “technology and financial center” dedicated to improving Australia’s competitiveness in the global crypto industry.

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Senator Prague, a blockchain advocate, said in an interview: “This will promote investment and employment in the crypto industry into Australia, and we will compete with Singapore, the United Kingdom and the United States.”

The report includes 12 recommendations related to the country’s regulatory reform of cryptocurrencies, the country’s ongoing problems with the “debanking” of crypto businesses, and even recommendations for decentralized autonomous organizations (DAOs), suggesting that the government provide for such organizations Establish a company structure and incorporate such elements into the regulatory plan.

Caroline Bowler, CEO of the crypto exchange BTC Markets and a member of the Australian Blockchain Board, said: “Beyond cryptocurrencies, people may not necessarily appreciate the complexity of certain ideas and concepts. Degree. What really impressed me and exceeded my expectations is the depth of this report.”

About 18 months ago, BTC Markets was exploring the best development path, but many new ideas often led to Bowler’s disappointment with Australia’s existing regulatory and licensing framework. Therefore, she supports the proposal in the report for the Australian government to establish a cryptocurrency trading market licensing system. “We often encounter the same problem that we cannot obtain the right licenses or regulations because they are designed for traditional finance. Therefore, this report is simply tailored for us and the future, which is great. This is exactly what I have been looking for.”

However, not everyone welcomes the introduction of a licensing system. Jonathan Miller , managing director of the Australian crypto exchange Kraken, believes that although he encourages the recommendations in the report and supports them, he believes that some of the recommendations are not standardized. “When we knew that there was no suitable system in the existing regulatory environment, I was a little nervous about the urgency of the licensing system and custody system surrounding cryptocurrencies. In fact, I still don’t believe there is a good system that we can rely on. Offshore work model.”

Miller believes that many of Australia’s existing regulatory frameworks surrounding anti-money laundering and anti-terrorist financing requirements are sufficient and do not require cumbersome licensing requirements. He pointed out that Australia’s high level of cryptocurrency adoption is evidence of this: Australian data website Finder found that 17.7% of respondents in the country own cryptocurrency, far exceeding the global average of 11.4%.

Miller said: “We have created a very good result for consumers, and I think we should not play with it too much. The risk is that the exchange will be offshored because the licensing system can be very onerous and costly, and these costs ultimately It must be borne by the consumer.”

Reform of the regulatory program

According to the report, according to data on cryptocurrencies and other digital assets submitted by the Australian Taxation Office (ATO), ATO believes that “the volume of crypto transactions has increased dramatically since the beginning of 2020”. ATO estimates that “more than 600,000 Australian taxpayers have invested in crypto assets in recent years.”

ASIC (Australian Financial Services and Markets Statutory Regulatory Authority) believes that under the current regulatory framework, the question of whether a particular encrypted asset is within or outside the financial regulatory framework “depends on the specific characteristics of the encrypted asset.” This may create uncertainty for investors and consumers, as well as the issuers and distributors of these assets. In addition, encrypted assets are not homogeneous asset categories, and each category of encrypted assets will cause different considerations. Therefore, the regulation of encrypted assets is a unique challenge, and it may be difficult to meet the existing safeguards to protect retail investors and the Australian financial market.

To this end, the Special Committee of the Australian Senate proposed a regulatory reform plan in the report:

1. Market licensing of crypto asset providers

In order to operate the financial market, the company must hold an Australian market license or be exempted by the minister. ASIC is responsible for issuing market licenses and supervising the operation of financial markets. Market licensees are subject to a series of licensing obligations, including reporting requirements, operating rules, and key personnel requirements.

2. Custody of crypto assets

The custodian is the agent of the main investment decision makers (including pension fund trustees and entities responsible for managing investment plans). There is already an extensive regulatory framework to manage the formulation and implementation of investment policies that are not related to asset types, and the licensing, capacity, capital, and flexibility requirements of material service providers, including custodians, have been designated. These should also apply to entities that provide digital asset custody. Therefore, there is no need for a new framework, but the existing framework should be adjusted at the edge to accommodate the unique functions of encrypted assets.

At the same time, crypto exchanges/platforms should have extensive and consistent KYC, and must be able to identify senders and beneficiaries, and make corresponding reports for AML/CFT (Anti-Money Laundering and Terrorism).

3. Cryptocurrency classification and “token mapping”

The committee recommends a comprehensive token mapping work in Australia, including studying the work done by other countries in the classification of tokens, “as the first step in a broader, purpose-fitting regulatory framework.”

4. Tax treatment of cryptocurrency and other digital assets

The report clarified the crypto tax system, the arguments for a broader tax review of crypto assets, the tax treatment of stablecoins backed by fiat currencies, the organization of taxation around cryptocurrency digital wallets, and the clarification of the taxation status of non-profit blockchain foundations .

“Debanking” Encrypted Business

“Debanking of encryption services” has been a hot topic in Australia recently. The report lists examples of repeated rejections of encryption services of various scales by banks. Sometimes banks do not even respond to reasons and directly freeze the bank accounts of encryption service providers.

“Debanking” has become a growing problem in the country. Although the Australian banking industry has consistently denied allegations of this practice, people in the crypto industry have increasingly complained about unfair treatment. Australian crypto exchange Bitcoin Canberra announced earlier this month that it had reached a settlement with ANZ, one of Australia’s “big four” banks. It is reported that Bitcoin Canberra’s founder Allan Flynn (Allan Flynn) was engaged in cryptocurrency business. It was “debanked” by ANZ Bank.

According to professionals, Australia has always had a significant dependence on the four major banks (ANZ, Westpac, Nab and Commonwealth Bank), and they have always been at the core of the “debanking” problem.

Miller, Kraken’s managing director, said that of the 190 countries in which Kraken operates, it has strong banking relationships in almost all of them, and Australia is the only country that “de-banked” it.

Senator Prague stated in a speech during the “Australian Blockchain Week” in April that he has recognized the difficulty and challenges of solving this problem. “We will not tell the bank who should provide banking services to, but we will step in to provide places that lack policy certainty. This is the separation of market and policy issues. Canberra [Australia’s capital] does not solve market issues. We will not Tell the bank to fund specific projects. We have developed a policy framework based on our governance philosophy.”

As a result, this month’s Blockchain Regulatory Report recommended that the Australian government develop a clear process for companies that have been “debanked”, which will be based on the Australian Financial Complaints Bureau.

Tax reporting obligations

Earlier this month, the Australian Taxation Office told the Senate Special Committee that it was concerned that many cryptocurrency investors in the country did not understand their tax filing obligations. As the crypto industry is currently expanding in the country, every time a cryptocurrency is traded is considered a taxable event, capital gains tax is required-not just the net gain or loss at the end of the fiscal year.

However, the committee recommends simplifying this process and simplifying the capital gains tax system so that taxable events are triggered only when “crypto asset transactions actually result in clearly definable capital gains or losses.”

In this regard, Kraken’s Miller supports this proposal, saying that the existing tax framework does not apply to the crypto industry, because cryptocurrency transactions are usually more complicated than cash transactions. “Usually crypto traders are not buying and selling for profit. What they are doing is transferring and participating in other assets, such as participating in various types of Dapps. However, they have been punished without the knowledge of the tax bureau. I think this is Incorrect.”

Suggest

As policymakers around the world begin to further address climate issues, this usually makes energy-intensive blockchains the focus of attention. Bitcoin is often criticized for its proof-of-work consensus mechanism and is one of the core arguments used by opponents. Although the debate on the availability and affordability of renewable and non-renewable energy continues, a special committee of the Australian Senate has made a novel proposal-a 10% tax break for companies that provide 100% renewable energy .

Bob, the CEO of BTC Markets, believes: “This is very far-sighted, and it’s great to see that they are trying to find different ways to stimulate the crypto business.”

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/interpretation-of-the-australian-senate-report-establishing-a-comprehensive-regulatory-framework-to-shape-the-future-of-the-australian-crypto-industry/
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