Why we don't need a separate regime for crypto

It’s been a crazy few weeks in Mayflower land. Jenny Calcott and I went to the ASFA Conference (real people, so weird!), long standing staff member Cameron Woods has left the business (7 years of PDSs is enough…) and we’ve brought on a new Senior Account Manager, Kelly Walsh (welcome Kelly!).

What I’d like to discuss today though, is something much bigger than my business. It’s the slated legislative regime for crypto. You can read the treasury paper?here. Consultation finishes this Friday. And of course, while there has just been a change of government, the crypto industry is lobbying hard to keep the momentum up and get new legislation passed.

Here’s the thing. We don’t need a separate regime for crypto. At all. What’s being recommended is a sort of watered down AFSL regime. But who is it for? If your product or service is a financial one, it should fall under the AFSL regime (and Austrac for that matter). If your product or service using crpyto/blockchain for some other purpose (say provenance of beef or apples) then it doesn’t need a licencing regime. Period.

So what’s really at play here? Well it seems to me that this is trojan horse legislation, playing on the fears of Australia ‘falling behind’ or ‘smothering innovation’, when what it’s really about is ensuring that crypto doesn’t have to abide with such pesky ideas as AML or proper governance. Note the use of language in today’s?article in the SMH.?

And just in case you think that no-one is really getting hurt… Here's a sobering article –?money laundering using crypto up 30% in 2021. And here’s another one from the Economist –?the war on money laundering is being lost. Do we really want to have crypto outside the AFSL regime? I think not.

Another argument being posited is that there ‘so much crypto’ outside of financial services. Really? Where? From what I can see, crypto is being used 99.9% for financial/financial-related. The rest is minuscule and again, doesn’t need a separate licencing regime. I thought we wanted to ‘cut red tape’…

Anyway, all of this is to say, if you have the time/inclination, please read the Treasury paper, and respond. If you’re a member of the FSC, you can drop them a line. Unfortunately I don’t think ASFA is doing anything, which is disappointing.

To finish on a more positive note (!) here’s an idea of something that WOULD encourage innovation in crypto, and in financial planning for that matter. ASIC Private Rulings.?

At the moment, you can apply to the ATO for a Private Ruling, so you can proceed with confidence. With ASIC though, until the day your product/service goes live, you can have ‘discussions’ with ASIC, but no definitive response. And then the day after your product goes live, ASIC are able to shut it down.

This is stifling innovation and making companies extremely risk averse. I heard a story last week of a million dollar project that was discarded just before ‘go live’ for this very reason. Ouch. ASIC Private Rulings would overcome this issue and allow for projects and innovation to proceed with confidence. Which is something I can definitely get on board with.

So there you go, my political rant for today. As if we haven’t had enough in the last few weeks…

Let me know what you think – am I completely wrong? Partially wrong? Not understanding the nuances? I heard a great phrase ‘strong opinions loosely held’ which definitely applies to me. So if there’s an aspect that I’m missing, let me know.