The crypto landscape in Australia is a wild west all unto its own. It is fascinating and feral at the same time. On the one hand, there are world firsts and incredible innovations. On the other hand, some cowboys are looking to strike it rich.
Let’s begin with how much Australians are into digital currency. They have had an incredible adoption rate for the blockchain, only being beaten in uptake by Nigerians and Malaysians.
A recent survey by YouGov supports this claim. It shows that a quarter (25%) of all Australians have owned crypto. By comparison, 13% of people in the United States have bought or traded crypto over the last 12 months. Then there’s the UK at just 4%.
Younger Australians are particularly keen on crypto and its promises. More than a third of the under-50s have owned, or do own, digital assets. Around 5 million Aussies have purchased cryptocurrency (out of a population of 25.7 million).
Australian businesses and retailers are beginning to accept bitcoin, including fast food outlets like Subway.
This is all good in theory. However, in practice, things in Australia have hit the fan. It’s not all crypto roses.
Challenges for Australia
Many business leaders and politicians would like to see Australia become an innovation hub for Web3 and cryptos. However, hurdles are coming at Australia from every direction.
The main issue is that cryptocurrencies have been legal in Australia since 2017. However, there’s still a lack of regulation of the industry. Even so, existing exchanges are managing billions of dollars in trades annually.
The only test to pass to operate a digital currency exchange (DCE) is a registration with the anti-money laundering regulator AUSTRAC. This body is known for having a “light touch.”
As such, AUSTRAC doesn’t protect investors in Australia regarding cryptocurrencies.
Australia and entrepreneurs
Government bodies, up until now, have been struggling to understand how to incentivize and help legitimate crypto businesses.
Currently, there is little motivation for Australians to start and run crypto-asset businesses in their own country. Entrepreneurs will no doubt be moving overseas to find a better working environment.
“The longer we leave it, the more, the more we fall behind,” says Dr. Aaron Lane, member of the RMIT Blockchain Innovation Hub.
This was especially obvious when compared to crypto-friendly jurisdictions like Singapore.
This disconnect between the government and the crypto space is echoed by venture capitalist Mark Carnegie.
“The speed with which we’re trying to actually implement regulatory change and the speed with which this technology in this environment is changing is just from different universes,” he says.
This same government is trying to convince the world that Australia is the next innovation hub for crypto.
Finally, there has been a breakthrough. In December 2021, the Australian Treasury announced that from next year, they would be putting a cryptocurrency licensing system in place.
Treasurer Josh Frydenberg said in an address that he wanted to bring crypto “out of the shadows.”
He also mentioned that Australians who invest in cryptocurrencies would have legitimate protections similar to the protections offered by other financial products. These are world-first changes to non-traditional finance.
Senate report
Much of the movement around regulation has come off the back of a “Crypto Report” hitting Australia’s Senate in October 2021. In it are recommendations to address issues in the cryptocurrency sector.
Incentives for crypto businesses are suggested, like a 10% tax discount applied to companies that use renewable energy to mine cryptocurrency.
It also suggests that the federal government should establish a new, decentralized autonomous organization company structure (DAO). If the new company structure is legislated, it will be Australia’s biggest corporate law reform in 20 years.
Currently, DAOs are not recognized under Australian law. They are recognized in other parts of the world, however. Wyoming in the United States legally recognized DAOs in 2021.
Debanking
Another theme of the Senate report was that of “debanking.” There are four big banks in Australia, and all are accused of being “debankers.”
“Denial of banking” is incredibly common in Australia for companies operating in the crypto space. Up until now, banks have been able to just chuck their customers without giving a reason.
With this comes the freezing of accounts with no notice. Some banks overseas have even been known to debank the customer and keep the money left in the account after access to the money has been denied.
Banks in Australia are reported to roll out excuses like concerns about money laundering and the funding of terrorism.
The wave of debanking has attracted the attention of the Australian Competition and Consumer Commission (ACCC). Businesses operating inside the crypto space say that the growth of blanket debanking is curtailing a revolution in fintech.
Peer-to-peer bitcoin exchange Bitcoin Babe recently reported that they were “debanked.”
They have been in the crypto space for seven years. Founder Michaela Juric said that she had been banned by 91 banks and financial institutions. She has said there were no reasons given, no discussions about it were available, and no recourse was offered.
Australia and the politics of crypto
When it comes to debanking, Australian Senator Andrew Bragg seems to have decided that this is the hill he will die on.
In an address to the Tech Council, Bragg said, “I believe many banks have been dressing up debanking as a regulatory necessity. In fact, it is often anti-competitive behavior and far more sinister and threatening than it appears on the surface.”
Senator Bragg indicated that this behavior is intensely familiar to the Australian Competition and Consumer Commission.
Other crypto traders have taken legal action against the “Big Four” for debanking. Recently, The Bank of Australia and New Zealand (ANZ) lost a case against Allan Flynn for debanking. Flynn has a similar case in the works against Westpac Bank as well.
Currently, the state of play is uncertain. The Senate committee’s Crypto Report didn’t make any recommendations to stop banks and other financial services companies from debanking cryptocurrency businesses.
Big banks move in
The Commonwealth Bank of Australia (CBA) is one of the “Big Four” banks in Australia. It is so big that it is the largest Australian listed company on the Australian Securities Exchange.
After being accused of debanking other companies for trading in crypto, they seem to have made a bold move into the crypto arena. They recently announced that they would be Australia’s first bank to offer customers the ability to buy, sell and hold crypto assets directly through the CommBank app.
“Research from CBA has found a large number of its customers want to access crypto assets as an investment class and are already buying, selling, and holding crypto assets through a variety of crypto exchanges,” explains the bank.
Superannuation and crypto
It’s not just single investors that are keen to invest in crypto. There is also a push for superannuation to include these currencies as well.
For those who aren’t Australian, Superannuation, or “super,” is money put aside by your employer over your working life. It’s your private pension, and it is a type of forced savings, only accessible after retirement or age 65.
You can get this managed on your behalf by an organization, or you can manage it yourself. While most people let an outside company manage their super, more Australians are starting to manage their funds themselves.
As Self-Managed Super Funds (SMSFs) get more popular with Australians, cryptocurrencies have caught their attention.
According to crypto exchange Swyftx, in Australia, 600,000 SMSFs have a combined total of 1.1 million members. SMSFs account for a staggering $676 billion, a huge portion of the nearly 3.3 trillion dollars invested in supers.
A benefit for both investors and government
The Australian government wants to do anything but pay pensions for Australians. (Aussies are some of the longest-lived people globally, and that’s expensive in pension world).
So the government offers tax breaks on any investment or savings that are locked into super. It’s a love match with investors who are searching for ways to expose their portfolios to bitcoin without paying exorbitant tax rates.
As a result, Swyftx now wants crypto enthusiasts to use their exchange to invest in cryptocurrencies via their SMSFs.
“Taxes on cryptocurrency that is not held in an SMSF could potentially range from 15% to upwards of 45%. SMSFs give special privileges to investors who want to include cryptocurrencies like Bitcoin and Ethereum as a part of a retirement investment strategy. SMSFs that include cryptocurrencies are eligible for the tax rate of 15%, which is significantly lower than what investors usually pay on cryptocurrencies as subject to the standard Capital Gains Tax (CGT) rate,” says Swyftx.
Cashing out. Whoops.
However, when it comes to moving crypto outside of Australia, some have been finding it difficult to participate on a global stage.
Many Australians using the U.S. Coinbase exchange have been complaining lately about limitations on Australians.
While Coinbase is easy to put money into from Australia, getting your money out is not. While there is a workaround, it requires extra steps and a local exchange.
In an article on this topic, Cam Wilson writes about his frustrating experience.
“Coinbase wouldn’t let me cash out because I’m Australian. Something I hadn’t figured out in my research was that the exchange was happy to take Australian dollars to buy cryptocurrency but wouldn’t let me sell it. Why? Not sure. But it felt crazy that one of the biggest establishments in crypto hadn’t figured out (or didn’t want to figure out) how to be fully functional in a country like Australia,” he says.
Other hurdles
Cashing didn’t U.S. exchanges isn’t the only issue. Other obstacles exist. The media is currently awash with negative stories when it comes to crypto.
Cryptocurrency trading in Australia is in chaos as two major crypto trading platforms have collapsed in the same week. The now-defunct myCryptoWallet went into administration in December of 2021, leaving many users without access to their crypto investments.
The platform has been having trouble with functionality since 2019. It seems they have gone into liquidation rather than fixing the existing problems.
In the same week, Blockchain Global also collapsed, leaving $50 million missing from the face of the earth. Users have been locked out with no foreseeable way of getting their crypto back.
Such dramas have highlighted that there is a gap in regulation in the crypto-asset industry which needs to be urgently addressed.
Looking to the future
The real news is that despite all of these hurdles, Australians are powering on in their belief in digital assets.
A recent survey by Finder found that one in four people plan to invest in crypto. That’s 5 million people Downunder ready to insist that exchanges go ahead and take their money.
Overall, proper regulation is on the horizon. There will be incentives for crypto entrepreneurs to stay in Australia.
The mainstream media is always a good barometer of general sentiment. Here, things are telling. For example, crypto stories used to only reach the crypto media. Now, mainstream media report on everything that is happening in the crypto world.
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