Crypto’s moment has arrived — that’s if you’re one of the true believers.
Thousands of devotees congregated in Sydney at the weekend for what organisers described as Australia’s largest cryptocurrency event.
The enthusiasm was plain to see as 120 speakers and 85 stallholders at the Aus Crypto Convention talked up the future of what is still largely an unregulated sector.
“We as an industry are here to stay and we’re growing — and this is no different to the dot.com boom of the 90s and early 2000s,” organiser and Digital Economy of Australia board member David Haslop said.
“This is the future of finance and we’re right in the thick of it.”
Bitcoin has hit all-time highs in the wake of the re-election of Donald Trump, who during his campaign promised to be a “crypto president”.
“I’m laying out my plan to ensure that the United States will be the crypto capital of the planet and the bitcoin superpower of the world, and we’ll get it done,” he told voters in July.
Thousands of crypto devotees attended Aus Crypto Con in Sydney. (Supplied: Sorted Media/Aus Crypto Con)
‘Regulation by enforcement’ lands crypto in court
About 5.6 million Australians own or have expressed interest in buying crypto, according to the Digital Economy Council of Australia.
It is also estimated thousands of Australians have fallen victim to crypto exchange collapses and scams.
“I would describe crypto regulation [in Australia] as stagnant,” barrister Aaron Lane told The Business.
“We’ve had numerous consultations after consultations, we’ve had drafts of consultations, and so I think what the industry wants now is some action, and that action looks like legislation.”
Instead, the corporate regulator has been left to take action case by case.
The Australian Securities Investment Commission (ASIC) has taken several high-profile enforcement actions against crypto businesses, arguing they have breached existing laws, namely the Corporations Act.
“What ASIC have sought to do is take … the Securities and Exchange Commission (SEC) in the United States, a leaf out of their book, and do what is called regulation by enforcement,” Dr Lane, a senior lecturer in law at RMIT’s Blockchain Innovation Hub, said.
“That is because the parliament won’t regulate. We’re going to get the courts to try and regulate this activity using the existing laws.
“It has had a clarifying effect but it’s also had a bit of a chilling effect as well. Industry see that and think, ‘I don’t really want to do business in Australia if that’s the attitude of the regulator.'”
Fred Schebesta’s company Finder has spent hundreds of thousands of dollars battling ASIC in the courts.
“It curbs innovation,” he said.
“It’s like you’ve got the Wright brothers trying to fly a plane, and they’re getting sued for not having a pilot’s licence. And that’s a major issue.”
Finder founder and executive chair Fred Schebesta.
The corporate regulator is currently appealing against a federal court ruling in March that Finder did not require a financial services licence to operate its crypto offering Finder Earn.
The product has been phased out and Mr Schebesta argued “no customer harm was actually experienced”.
“We won the case and then it’s been appealed again, and that’s a major distraction,” he said.
Crypto exchange Kraken faces penalty
In August the federal court found crypto exchange Kraken had fallen foul of the law, breaching the Corporations Act when offering a margin trading product.
The regulator argued at least 1,160 people used the product and racked up a total loss of about $12.95 million.
“We were disappointed. It’s not where we wanted to end up,” Kraken’s managing director for its Australian operations, Jonathon Miller, said.
“We’d engaged over several months, in fact, years, around the issue.”
Mr Miller is now waiting for the federal court to decide on the size of Kraken’s civil penalty after losing to ASIC in court.
“We recognise that we came up short there. That’s absolutely on record,” he said.
“But now we’re looking to the future and we see that regulation in general around crypto, there needs to be some work there — and Australia is lagging.
Jonathon Miller says Australia is lagging behind in cryptocurrency regulation. (ABC News: John Gunn)
Pro-crypto lobbyists launch ahead of federal election
In the US, a lobby group reportedly raised more than $US200 million ($306 million) for pro-crypto candidates.
Now, the same group has launched in Australia, spearheaded by exchange platform Coinbase, with plans to push for crypto-friendly regulation in the lead-up to the next federal election.
“In the US, I think turnout is a big thing, and so efforts to turn out the vote are always a big one. I think with compulsory voting in Australia, that’s a different dynamic,” Mr Lane said.
“Nevertheless, I think these groups are important for getting it on the agenda.”
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While there’s scepticism about the influence the crypto lobby will have at the next federal election, there is plenty of politicking going on.
Liberal senator Andrew Bragg has slammed the federal government for failing to protect investors after the collapse of local crypto exchanges and FTX in the US.
Senator Bragg also says the federal government has left Australians exposed as the price of bitcoin rises and more investors show interest.
A spokesperson for Financial Services Minister Stephen Jones has previously questioned why the Coalition did not introduce crypto laws when it was last in power, and in a statement said the Albanese government was on track to regulate cryptocurrencies and would release draft legislation in “due course”.
Corporate regulator ASIC acknowledges that without specific crypto regulation, it is using the courts to test breaches of the Corporations Act.
“The community expects that ASIC will enforce the laws that have been determined by the parliament, and that’s exactly what we’ve done in relation to crypto,” ASIC commissioner Alan Kirkland told The Business.
‘These are risky and volatile assets’
The corporate regulator is expected to release draft guidance for the crypto industry next month.
“We know that there are around 400 digital currency exchange changes registered with AUSTRAC, so that gives you a sense of the size of the industry,” Mr Kirkland said.
“But there’ll be a range of other businesses that are also involved in crypto.”
About 40 crypto-related businesses are currently licensed with ASIC.
“We’re encouraging others to look very closely at their products and services and, if in doubt, apply for a licence.”
“Licensing alone won’t prevent all harm, but what it does mean is that ASIC in is a in a better position to take action when we see harm,” Mr Kirkland said.
ASIC Commissioner Alan Kirkland warns consumers to be cautious of cryptocurrencies. (ABC News: John Gunn )
Earlier this month, ASIC chair Joe Longo dismissed the recent rally in crypto and other crypto assets as an example of “the bigger fool theory”.
Reserve Bank of Australia governor Michelle Bullock told the same audience at ASIC’s annual forum that bitcoin was not an “alternative currency” and she did not see a role for it in the Australian economy.
Mr Lane said he was surprised by the comments.
“I think it’s quite insulting to consumers to say these are, these are worthless assets and that you shouldn’t be doing it,” he said.
“I think these are, this is a serious asset class. There are serious companies involved here.
“This is a serious industry, and we need ASIC to take it seriously as well,” Mr Lane said.
Aus Crypto Convention attendees who spoke to The Business scoffed at the ASIC chair and RBA governor’s views on crypto, describing them as “old thinking”.
“Anyone who says bitcoin is not the future can have fun staying broke,” one attendee said.
Mr Kirkland did not explicitly endorse the comments of ASIC chair Joe Longo, but had a warning for those getting caught up in the latest bitcoin rally, which he said “demonstrates some of the inherent risks with crypto investments”.
“Price changes are often driven by factors on the other side of the world,” he said.
“That’s why we say these are risky and volatile assets, and you should approach them really carefully if you’re considering putting your money into them.”
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