Election 2022: Crypto Politics

Governments of many persuasions around the world are reviewing their legislative and regulatory frameworks around crypto and those that get it right stand to gain the most as the industry evolves. How do those vying for our vote plan to tackle the challenges and opportunities presenting themselves from the sector’s growth?

Crypto enthusiasts of all ages represent a political cohort of growing significance and influence. The recent Independent Reserve Crypto Index 2021 reported that 29 per cent of Australians have owned or own crypto, 89 per cent of those surveyed had heard of Bitcoin, and crypto ownership had grown in every state and territory.

In her address on 21 March to Blockchain Week, an industry event which took place in Sydney, Jane Hume, the minister for superannuation, financial services and the digital economy gave some clear indications about the Coalition’s view, including a dig at Labor. Some excerpts from her speech:

• “Crypto assets do not require the government to assure trust in the same way that financial products do. There is a lot more transparency. There are a lot less things that can go wrong. Crypto assets do not generate the same potential harms as financial products. So we will not regulate them the same way. Crypto assets are an order of magnitude more trustless than pretty much any other good or service out there”.

• “The Coalition is regulating licensees and custodians - this is the Coalition’s plan to let Australians invest in crypto assets safely and securely”.

• “Labor believes that those who trade crypto are “swimming outside the flags”. Their shadow financial services minister in 2019 argued for banning crypto transactions of over $10,000. And other members of the Labor Party either don’t understand the industry or they are simply playing dead. They are refusing to say what they would do to the crypto industry”.

• “A Labor Government – out of timidity, an obsession with removing all risks and protecting consumers from themselves, or out of natural aversion to something that government can’t control – would close the frontier”.

• “The policy paper released today reinforces our commitment to a predictable, minimalist, consistent and simple legal environment. This will help ensure that Australian crypto businesses can have an Australian-made badge of approval. It will ensure that Australians can trust the services which they use to interact with the crypto ecosystem”.

Stephen Jones, the shadow assistant treasurer and the shadow minister for financial services and superannuation, countered:

• “The broad principles we would take to crypto regulation is safety and transparency. That inevitably leads to greater regulation of exchanges”.

• “I think the industry has evolved to a point where it understands some regulation is needed to ensure that consumers and product developers can operate in a safe reliable ecosystem, and that cryptocurrency can emerge from something which is traded as a store of value to something which increasingly becomes a means of exchange”.

• “It cannot do that unless we have the right sort of regulation which provides safety security for both developers and consumers."

• “The principle of any reform is that we have a safe ecosystem for producers and consumers of cryptocurrency products. Inevitably that means dealing with the points of exchange so that traders can have confidence that the crypto products they are purchasing are what they say they are, and that increasingly business-at-large will accept cryptocurrency as a medium of exchange”.

• “I don’t think it’s in the interest of serious crypto investors, crypto exchanges, and developers to have a government that thinks the future is wild kingdom”.

Investors wanting to go beyond the soundbites might wish to brave the Senate Select Committee on Australia as a Technology and Financial Centre’s final report which focussed on crypto and digital assets, published in October 2021 and chaired by the Coalition’s Senator Andrew Bragg.

Some of Senator Bragg’s comments:

• “Australia can be a leader in digital assets. This means Australians can access new choices and lower prices. It means Australians can have more control of their financial destiny rather than being dependent on endless intermediation”.

• “The Committee has recommended a comprehensive crypto framework to deliver Australian leadership. We’ll be competitive with Singapore, the UK, and the US”.

• “This will drive investment and jobs into Australia”.

It’s understood that most of the committee’s recommendations are supported by the government, including the ability for businesses to offer custody services for crypto under a special licence for crypto market participants.

Most industry participants recognise the need for an expansion of custody related services to extend crypto’s reach beyond the technically literate. But it is the extent of regulatory oversight where the two major parties might differ in their focus and/or approach.

Former ASIC chair Greg Medcraft has talked about the three main crypto themes likely to be the subject of regulatory focus over the next few years

1. ESG concerns.
2. COVID-19 recovery.
3. Ongoing digitalisation.

In terms of ongoing digitalisation, he calls out payments regulations, central bank digital currencies (CBDCs), centralised exchanges, DeFI, investor and consumer protection, competition, anti-money laundering and taxation as important areas.

Electoral candidates would do well to consider the level of crypto penetration amongst eligible and future voters. According to the Independent Reserve Crypto Index 2021 mentioned earlier female crypto holders have increased from 10 to 20 per cent and crypto ownership grew in every state and territory, with 33 per cent of Western Australians owning crypto.

Perhaps unsurprisingly (and either encouraging or despairing depending on your point of view), the 24-34 years old age group was the most trusting of crypto with 27.6 per cent saying they bought in to get rich, while disbelievers are most likely aged 65 and over.

Clearly, crypto enthusiasts of all ages represent a political cohort of growing significance and influence. Politicians current and wannabes may rue ignoring them at the polling booth, if not at this election, then very likely at elections to come.