Intense volatility, reluctant real-world adoption and cryptic – excuse the pun – accessibility issues have emboldened consumer advocates to petition the newly-elected federal government to assess and identify ways to regulate cryptocurrency markets.
Prices plunged this year, compelling market analysts to declare a “crypto winter”. Despite this latest downturn, digital currency markets remain popular and continue to attract new investors.
This novel medium of exchange isn’t disappearing and Australia’s newly minted government has been criticised for its lack of crypto-focused policies. However, earlier this year Labor’s financial services spokesperson Stephen Jones said the government was considering regulating the crypto space as part of a digital payments system overhaul, The Sydney Morning Herald reported.
The Australian Securities & Investments Commission (ASIC) does not recognise cryptocurrencies as financial products and therefore have no capacity to protect investors against oft-encountered pitfalls such fraud, privacy issues, ponzi schemes and scams.
Investment reluctance
Over one million Australians aged 18+ hold cryptocurrency – at an average value of just over $20,000, according to the latest research by Roy Morgan. That’s only one in 20 people. Those uninvolved may be dissuaded by market volatility, scams and the possibility of losing their money.
Scams are rife throughout the unregulated digital corridors of the internet. There is next-to-no recourse for those who fall victim to cryptocurrency scams. These deceptions are complex, quickstrike and anonymous with fraudsters commonly preying on unseasoned, first-time investors.
Australians lost more than $205 million to scams during the first four months of this year, according to the Australian Competition and Consumer Commission’s (ACCC) Scamwatch. More than half of these losses – $113 million – were attributed to investment scams involving cryptocurrency. Cryptocurrency was also reported as the most common payment method for investment scams.
“Australians should be very wary of anyone asking them to invest in or transfer money using cryptocurrency, especially if it’s someone you have only met online. Many consumers are unfamiliar with the complexities of cryptocurrency and this can make them more vulnerable to scams,” ACCC Deputy Chair Delia Rickard said.
Legislative solutions
Late last year the Morrison government committed to adopting a slew of recommendations laid out in a report delivered by Liberal Senator Andrew Bragg. The report suggested a legal framework for the regulation and licensing of digital currencies; solutions for reducing emissions related to crypto mining; and addressed the practice of debanking – a mechanism where tech firms, often those with a spotlight on cryptocurrencies, are blocked from accessing mainstream banking services.
The Department of the Treasury began consultations targeting crypto regulations in March of this year. This process closed last week and included submissions from a range of industry experts.
Professional services firm KPMG said it supports the development of a single definition for crypto assets and a uniform regulatory framework to safeguard private keys, while the Financial Planning Association (FPA) backed the idea of a “crypto rule book” and suggested regulating exchanges instead of crypto assets.
“Investment in crypto assets is as much in relation to the asset itself, such as an ether coin or a non-fungible token (NFT), as a bet on the sustainability of the technology platform supporting the asset, for example the Ethereum blockchain,” the FPA’s submission stated, according to Professional Planner.
The U.S. Treasury Department published a fact sheet earlier this month mapping out ways the government can work with foreign regulators to address the risks and harness the potential benefits of digital assets and blockchain technology. The United States also aims to promote the development of digital asset and central bank digital currencies (CBDC) technologies.
As Australia’s government decides how best to implement governing measures for this burgeoning industry it may be constructive to follow the United States’ lead and consider seeking international cooperation and advice.
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