The Senate Select Committee on Australia as a Technology and Financial Center detailed 12 recommendations in its third and final report – among them is a clear plan to encourage Australia to stand alongside Singapore and the UK as a global leader in regulating the digital economy.

“Australia can be a leader in digital assets. This means Australians have access to new choices and lower prices. It means Australians can take more control of their financial destiny, rather than depending on endless intermediation,” the committee’s chairman, Senator Andrew Bragg, said at the launch of the report.

The committee’s comprehensive crypto framework, which is believed to boost investment and jobs in Australia, recommended changes to capital gains tax so that transactions in digital assets only create a CGT event when they actually result in a “clearly identifiable capital gain or loss’.

Also among the 12 recommendations aimed at increasing Australia's attractiveness to global digital and crypto asset businesses are new market licensing regimes for digital currency exchanges (DCEs), custody and depository services for digital assets and a review of the fight with money laundering regulations.

The report also proposes a 10 per cent tax credit for businesses undertaking digital asset 'mining' and related activities in Australia if they extract their own renewable energy for those activities.

Welcoming Senator Bragg's recommendations, Associate Professor Chris Berg and co-founder of the Blockchain Innovation Hub at RMIT University called on Parliament to adopt them "as soon as possible".

"We have the opportunity to take a global leadership position and compete with countries such as the United States, Singapore and Switzerland in this incredibly vibrant sector," Mr Berg said.

"It's good to see our recommendations to change the way cryptocurrencies are taxed and how blockchain-based Decentralized Autonomous Organizations (DAOs) are regulated passed by the Australian Senate," he noted.

The report was also applauded by BTC Markets CEO Carolyn Bowler, who said it not only met expectations for a proportionate, responsive policy change, but exceeded it in many ways.

"We congratulate Senator Bragg's committee on this ambitious move to support the future of financial innovation in Australia."

“Overall, this is an exciting and positive landmark day for the industry. This is an opportunity to reaffirm Australia as a country that supports innovation; consolidate our regional leadership in financial services; and to attract foreign interest and investment.”

Most exciting new DAO structure

The report's recommendation to create a new DAO company structure has attracted the most attention, with RMIT's Dr Aaron Lane calling the change, if legislated, "the most significant corporate law reform in two decades".

“Blockchain and cryptocurrency is not just about enabling new types of financial products – this technology is the infrastructure for new ways of managing economic exchange,” said RMIT Blockchain Innovation Hub researcher Dr Lane.

"Giving DAO members the option of a limited liability company structure will encourage talent and investment in Australia."

DAOs are common-law partnerships, syndicates, or unincorporated associations whose activities and investment decisions are coordinated by code or smart contracts.

Currently, DAOs and other blockchain projects with decentralized governance structures are not readily recognized within existing regulatory categories under Australian law.

According to Ms Bowler, the recommendation to create a new DAO company structure is "a very promising inclusion in providing greater choice to customers and will be extremely helpful in reasserting Australia's position as an innovation hub".

Debanking

Another key recommendation called for the government, through the Financial Regulators Council, to set up a scheme to deal with bank due diligence requirements by June 2022.

It is also suggested that creating a "clear process" for businesses that have been debanked would increase certainty and transparency around debanking.

“Debanking is exhausting. This is destroying the ability of Australian small businesses to disrupt and deliver new ideas,” Senator Bragg said.

Under recommendation 10, the process should be anchored around the Australian Financial Complaints Authority, which serves licensed persons.

The commission also heard that giving businesses more direct access to payment rails, rather than having to rely on the big banks, could help tackle issues around debanking.

Commenting on the report's findings, Rebecca Schott-Guppy, chief executive of FinTech Australia, said the establishment of an escalation point with regulators was an "excellent first step" towards managing debanking in the fintech industry.

“Hundreds of fintech companies have been debanked without any form of protection. As we have argued in the past, we believe this behavior is anti-competitive,” Ms Schott-Guppy said.

FinTech Australia previously told the commission that debanking "is a serious issue for the entire fintech market".

“As it stands, fintech companies, both homegrown and expanding into Australia, are at the mercy of the banks' whims. Just one directive from a bank can put a fintech company out of business without fault and without recourse. This is because a bank, without consultation, can withdraw services not only from fintechs but also from its customers,” FinTech Australia said at the time.

"This problem, if left unaddressed, will undermine the future of the fintech industry and lead to a serious reduction in the number of companies in operation," he adds.

Maja Garatsa Djurdjevic

Maya's career in journalism spans more than a decade in finance, business and politics. Now an experienced editor and reporter in all elements of the financial services sector, before joining Momentum Media, Maya reported for several established news outlets in South East Europe, looking at key processes in post-conflict societies.