Australian government kicks off regulation of cryptocurrencies
Australian government kicks off regulation of cryptocurrencies

Australian government kicks off regulation of cryptocurrencies

By Andrea Porcelli - 6 Feb 2023

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The Australian government long ago promised crypto regulation.

The goal is to delineate the proper power to authorities and provide more tools to act on malfeasance.

Australia’s crypto regulation

On August 22 last year, the government announced “token mapping,” an important step in reforming appropriate crypto regulations.

Token mapping enables the construction of a shared understanding of cryptographic resources in a regulatory context.

Australian financial services can therefore integrate with the cryptographic sector for future regulatory and policy choices.

The goal is to achieve, precisely, an appropriate balance between regulatory regulation and the technological development of the cryptographic sector, to be able to embrace innovative technologies while safeguarding the consumer.

In the consultation document, released yesterday, the Australian Treasury explained that all those who invest in the cryptocurrency sector must include their crypto assets in their tax returns.

In the consultation document also the key concepts needed to build a shared understanding of the crypto ecosystem.

The goal is to help industry, regulators and consumers navigate the cryptocurrency ecosystem and its interaction with financial services laws.

The paper describes the concept of a functional perimeter, i.e., the broad, functional definition of “financial product” in the Corporations Act, which is intended to be technology-neutral, flexible, and innovation-friendly,

It also proposes a token mapping framework to help conceptualize how cryptographic products could fit into existing regulatory frameworks.

The token mapping framework defines the concepts of “tokens,” “token systems,” and “functions.” A cryptographic token plays the role of registration. It is analogous to a physical token or an entry in a registry. The government will propose a custody and licensing framework for public comment in mid-2023. The mapping of tokens will be used to define the development of these schemes.

Australian government believes in the crypto sector

The Australian government’s move is therefore not put in place to destroy the cryptographic ecosystem, but rather to make it even more concrete.

By integrating the cryptocurrency world into Australian financial systems, with the right regulation and transparency, they have given a positive signal for the concretization of the sector.

What can this mean, then?

On the part of the Australian government, opening up and regulating this sector can bring concrete development to the country. It can open up significant new opportunities for citizens, stimulating job creation and technological innovation.

Above all, this is why Australia has joined such a regulatory, normative initiative.

Clearly, today is one of many steps the government will need to take to fully regulate and integrate crypto assets into the financial sector.

There will most likely need to be some regulatory reforms to ensure the future protection and stability of consumers.

Without these kinds of reforms, many crypto assets or for that matter many products that are part of the crypto ecosystem would be incompatible with the current regulatory framework.

Australia’s premier, Anthony Albanese, stated:

“The previous government ventured into cryptocurrency regulation, but prematurely switched to options without first understanding what was being regulated.”

According to the publication “A report on the state of cryptocurrency in Australia August 2022”  by finder last year, one in six Australians owns cryptocurrencies, particularly Bitcoin, with a total value of $8 billion.

One can well understand why such initiatives are taking place. Australia is one of the most important states to initiate fair regulation of the industry. With the hope that other states will follow Australia’s example in 2023 to start a process of regulating the crypto industry globally.

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