Australian Crypto Reform Finds "Fresh Urgency" Amidst Russia's Invasion in Ukraine

Senator Andrew Bragg will be working closely with the Treasurer to implement changes around cryptocurrency and digital assets. Bragg, who chaired the Senate Select Committee on Australia as a Technology and Finance Center, addressed Blockchain Week 2022, quoting the Treasurer in calling these changes “the most significant reforms to [Australia’s] payments system in 25 years.”

Mainstream adoption of cryptocurrency is a necessary step for the technology, but no one has a true understanding of how to accomplish it. Vague, rushed policy becomes meaningless, while over-regulation defeats the purpose of decentralized currency altogether.

The Australian government has been working on crypto reforms for nearly a year, but points out that the issue has been given “fresh urgency” after Russia’s invasion of Ukraine, and subsequent ejection from the global SWIFT banking system.

Nearly one year ago, Senator Bragg addressed Blockchain Australia Week to explain that his committee would be adjusting course to focus largely on blockchain technology. The committee received and reviewed 88 submissions, consulted widely with experts in blockchain, and ultimately made 12 recommendations, 11 of which were either noted or accepted by the government.

The committee’s recommendations aim to balance risk and opportunity. Under the new guidelines, Decentralized Autonomous Organizations would be classified as companies, and would be brought under the fold of the Corporations Act. Tax reform constituted another major priority – Australia’s last major tax reform was to introduce the GST, and it took nearly 20 years to accomplish.

Now, the country’s Board of Taxation is scheduled to review the subject of digital assets. The board will clarify tax status of, among other issues, pay-to-earn games, Initial Coin Offerings, airdrops, staking, and the currency state of stablecoins and CBDCs.

This year’s address went on to list next steps and goals for the remainder of 2022. However, the committee’s task became more urgent after Russia was cut out of the SWIFT system, with Bragg pointing to the likelihood of Russian entities using cryptocurrency as a backdoor.

According to the Australian Computer Society, the volume of high-value daily cryptocurrency transactions (those worth more than $100,000 USD) quadrupled from 16 billion to 64 billion, just two days after Russia was removed from SWIFT.

“We can’t have a situation where a product which is used by millions of people can become a backdoor for sanctions,” said Bragg. “When individuals, businesses, investment funds, pension funds, sovereign wealth funds, are being compelled to divest from Russian assets, it doesn’t make sense to allow crypto to provide a back door.”

Bragg went on to say that in some ways, he envied the nimble and experimental capabilities of smaller, more centralized governments. While he acknowledged that Australia will “never be the Isle of Man, the Bahamas, Singapore, or Jersey”, he said that lawmakers “can’t use that as an excuse…that doesn’t mean [lawmakers] should just give up.”

The committee is set to push forward on these reforms, and consolidate them into a comprehensive Digital Services Act. The legislation, if passed, would be an Act of Parliament, the highest policy tool available in Australia.