Cryptocurrencies have created a lot of havoc in the world market in recent years. The boom in this nascent industry has created a space for new startups. However, due to the core philosophy of the underlying technology itself, it has become a headache for the governments and regulators all around the world to put a leash on this wild sector.
Many countries have accepted the new sector with open arms, while others showed a hostile nature towards it. However, the approach of Australia towards cryptocurrency startups and exchanges has made quite a mark on the global map.
Why are imposing crypto regulations hard?
The entire blockchain sector is decentralised and scattered all over the world. So unlike traditional sectors, the authorities cannot impose rules on a particular entity to control the entire sector. Moreover, the digital assets do not have any intrinsic value like company stocks, and even the holders of the tokens of a particular blockchain project do not share any ownership of the company.
With all these, the market watchdogs have no option to put any regulation on the wild sector, and the only better step left with them is to control the flow of fiat in the unregulated economy.
Regulations are good
Earlier this month, the Australian Transaction Reports and Analysis Centre (AUSTRAC) had come up with a new set of regulations to impose on the cryptocurrency firms. The agency made it mandatory for the crypto exchanges to register with it along with mandatory KYC and AML rules.
The process of handing out license has already started, as the agency granted it to three cryptocurrency exchanges so far – BTC Markets, Independent Reserve, and Blockbid.
This move by the watchdog agency was hugely supported by the crypto community of the island-continent as it guarantees legitimacy in a hostile environment.
Legitimacy to crypto
Australia, moreover, has become one of the few countries worldwide to legitimise cryptocurrencies and consider them as a legal tender. Following Japan, Australia declared Bitcoin a legal tender, which became effective from 1st July 2017.
Taxing the digital assets is another complexity faced by the authorities worldwide, and in this arena too, Australia favoured the new market. Last month, the Australian Taxation Office (ATO) had published regulatory guidelines to tax the digital asset, but before finalising, it sought feedback from the country’s citizens on the new frameworks. Moreover, the tax agency partnered with AUSTRAC to tackle the complexities faced by the digital asset investors.
The government also considered the issue of double taxation and passed a bill to apply the conventional goods and services tax on cryptocurrency purchases.
Initial coin offering, better known as ICO, is the most controversial fundraising technique today which is the solely related to the blockchain sector. Many countries – China and South Korea – have put an outright ban on this fundraising technique with its boom last year. The United States, which is currently the largest market for ICOs, is experiencing a hostile environment lately as the Securities and Exchange Commision is constantly criticising the process.
However, Australia has taken a liberal approach here too. Last October, the Australian Securities and Investments Commission (ASIC) unveiled its set of rules for the blockchain firms opting to raise funds with ICOs. The regulatory body clarified that it would treat the ICOs based on the nature of the token – whether it is a security or utility token. Moreover, all the token sales will come under the country’s consumer law.
The liberal stance of the Australian government has provided a perfect breeding ground for the blockchain firms.
Lately, Australia has seen an influx of blockchain accelerators to the country, along with many home-grown ones. In late 2017, Singapore-based NEM.io foundation has expanded its reach to Australia to promote and encourage development on its NEM blockchain. The foundation announced a multimillion dollar fund for the blockchain-based startups of the country and had invested $650,000 in the local IP-focused blockchain startup CopyrightBank.
Moreover, the number of ICOs in Australia and the associated fundraising amount significantly increased in 2018. Many Australian blockchain firms scored millions via ICOs. Havven and Power Ledger raised $38 million and $34 million respectively via token sales. The first firm provides a solution for one of the more difficult aspects of the inherently volatile cryptocurrency sector by providing a tradeable digital coin with a stable value, while the second one is an energy trading platform for solar panel users.
Other notable names which raised millions by selling digital tokens include CanYa ($12 million), Shping ($5 million), Chronobank ($6.8 million), Intimate ($5.5 million), ShareRing ($3.8 million), BlockGrain ($3.5 million), Blockbid ($3.2 million), and Horizon State ($1.4 million).
Moreover, the regulations of Australia are also allowing foreign firms to seek investors in the Australian market. Recently, a German blockchain startup Shivom was found to enter into talks with local Australian market consultants to find potential investors for its $US75 million ICO.
Is it good or bad?
There is no doubt that blockchain is disrupting multiple sectors. However, because of its rigid nature, governments and regulators of many major economies of the world are turning hostile as curbing the growth of digital assets is very tedious.
Australia’s liberal policies towards the wild sector might be a game changer and lead the country to become one of the world’s blockchain hubs.