According to BTC Markets, there are gaps in Australia’s policing of digital financial products and the exchanges that support them – which may see the nation lag behind its international peers.
The company has noted that other countries are moving ahead in regulating their crypto markets, driving local companies to list in security token offerings (STOs) overseas.
Since listing requirements appear less onerous than those for traditional exchanges, it could attract young companies seeking an alternative capital raising model.
“We have seen firsthand experience of private equity, venture capital firms and investment banks looking to float innovative Australian companies via STOs but are hamstrung by a lack of local market infrastructure, inhibited by a regulatory framework shaped for traditional markets,” Caroline Bower, BTC Markets chief executive said.
“This approach locks out much needed capital raising for Australian innovators and entrepreneurs and closes the door for local investors to access good quality investment opportunities. With recent advances overseas, such companies are looking for opportunities elsewhere in Asia-Pacific.
“As an Australian exchange, the challenge lies in navigating the unclear and at times, outdated regulatory environment.”
Hong Kong has initiated a licensing regime for digital currency exchanges, which includes the ability to list STOs.
Singapore also requires crypto businesses to be licensed, while the US has introduced its Crypto Currency Act 2020 in Congress, as well as licensing crypto banks in Wyoming.
The European Commission is mulling possibly adapting existing frameworks to regulate innovation, proposing a pilot regime for market infrastructures based on distributed ledger technology.
BTC Markets believes that Australia can follow its overseas counterparts, as digital trade is estimated to be worth $192 billion in the domestic economy by 2030.
Digital goods and services is currently the country’s fourth-largest export sector, according to the Department of Foreign Affairs and Trade.
“As a digital asset exchange, we would strongly welcome a bespoke regulatory regime – similar to that developed by the European Commission, Ms Bowler said.
“We recognize the increasing focus from the government via forums such as the Senate Select Committee on FinTech and RegTech, the National Blockchain Roadmap and ongoing support from the ASIC Innovation Hub. Nonetheless, leadership needs to come from all stakeholders.”
Australia needs to keep apace with the rapidly changing industry, Ms Bowler noted.
“Australia needs to prepare for the future of finance. We believe prioritising digital financial legislation will have a significant longer-term impact across our entire economy,” she said.
“With the COVID-19 pandemic accelerating the move to digital, technology needs to be viewed as the driver of future jobs and economic growth to ensure Australia remains globally competitive.
“We have reached the limit of where future economic demand meets existing financial regulation.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
Sarah has a dual bachelor's degree in science and journalism from the University of Queensland.