The Senate Committee on Australia as a Technology and Financial Center (ATFC) has just tabled its third and final report in parliament, which has 12 far-reaching recommendations for the regulation of the digital asset and fintech industry down under.
It proposes new licenses for crypto exchanges, new laws to govern decentralized autonomous organizations (DAO), an overhaul of capital gains tax in decentralized finance (DeFi) and a tax discount for crypto miners using renewable energy.
In general, the report found that there is a need for more regulatory clarity and certainty while avoiding stifling innovation with onerous requirements.
A key recommendation is to establish a new DCE Market License for digital currency exchanges, including requirements relating to capital reserves and auditing. The requirements should be scalable so that smaller operators are not squeezed out of the market.
It also recommended the capital gains tax rules should be updated to provide more clarity around the tax treatment for crypto assets and DeFi staking. The committee suggested that unlike in the current system, capital gains tax should only be applied when cryptocurrency transactions “genuinely result in a clearly definable capital gain or loss.”
The committee also recommended that the Treasury lead a policy review of the viability of a central bank digital currency, as well as put forward a proposal for a company tax discount of 10% for crypto miners who use renewable energy.
One world-leading recommendation is to establish a new regulatory structure for DAOs, which refers to decentralized community ownership and governance of a protocol.
“DAOs do not clearly fall within any of Australia’s existing company structures… this regulatory uncertainty is preventing the establishment of projects of significant scale in Australia.”
Asher Tan, CEO of Australian crypto exchange CoinJar, praised committee chair Senator Andrew Bragg and the team for “the forward-thinking approach they’ve taken with this proposed regulatory framework.
“In our view, the AFTC report strikes a commendably optimistic tone that sees blockchain technology as the historic innovation that it is — and one that comes with matching opportunities and risks.”
The committee heard from a range of experts and industry players, including Blockchain Australia, leading exchanges, and firms, such as R3 and Ripple. The latter recommended that any regulatory framework should use a “risk-based approach to identify digital asset services that pose sufficient risk to warrant regulation.”
Steve Vallas, CEO of Blockchain Australia, said the organization was keen to hear from stakeholders for their feedback on the recommendations.
Senator Bragg said the proposed regulations would help Australia to become a leader in digital assets.
“The committee has recommended a comprehensive crypto framework to deliver Australian leadership. We’ll be competitive with Singapore, the U.K. and the U.S.”
Related:Average Aussie crypto portfolio grew 258% in FY 20–21, survey reveals
The Australian Taxation Office estimated that more than 600,000 taxpayers have invested in digital assets in recent years. Independent research suggests that 17% of Australians currently own cryptocurrency.
The report concluded that a robust regulatory framework was required in order to protect consumers, promote investment in Australia, and remain competitive globally.
“The potential economic opportunities are enormous if Australia is able to create a forward-leaning environment for new and emerging digital asset products.”