With crypto regulation reportedly set to ramp up in Australia over the next 12 months, Kraken Australia’s managing director Jonathon Miller thinks that a strict crypto regime could stifle local competition.
The Senate Committee on Australia as a Technology and Financial Center, led by crypto-friendly Senator Andrew Bragg, tabled 12 extensive recommendations for regulation of the digital asset and Fintech industry last month. The proposals included a new licensing regime for crypto exchanges, new laws to govern decentralized autonomous organizations (DAOs) and an overhaul of the capital gains tax in decentralized finance (DeFi), to name a few.
In an exclusive interview with Cointelegraph, Miller said it was “yet to be seen” if the proposed regulations would have a positive or negative effect on the local sector moving forward, noting that:
“We've seen other markets where onerous regulatory regimes have come in and you know, you see a collapse of competition, a collapse of the vibrancy that we've got today in Australia.”
“And I hope that doesn't happen because that will be bad for the consumer in the long run,” he added.
Under the proposed market licensing regulations for Australian digital currency exchanges (DCE), local firms would need to meet strict “capital adequacy, auditing, and responsible person” requirements to obtain a license to operate.
Speaking on the matter, Miller drew comparisons with Japan as he argued that the limited number of options on the market are due to the government's strict licensing requirements, which also negatively impact the local consumer.
“[Kraken has] a markets license in Japan, one of the very few crypto companies available to Japanese users. Even though we're active there and we're really supportive of that market, I don't think that's good for the Japanese people that there are so few opportunities for players in space,” he said.
Caroline Bowler, the CEO of local crypto exchange BTC Markets offered a different take, however, telling Cointelegraph that the incoming crypto regime in Australia will “enhance and enable innovation.”
“The proposal, I feel, had a lot of very forward-looking points of view in it. The talk about decentralized autonomous organizations (DAOs), in particular, that would be extremely innovative from a regulatory point of view for any country, any jurisdiction, anywhere in the world,” she said.
Bowler stated that the “single biggest roadblock” for the firm when exploring expansion opportunities for compliant services and products last year was the lack of crypto-focused regulation in Australia:
“That was causing issues across the business and issues for us to expand and issues for our clients and causing a hesitancy amongst people coming in. We couldn't offer the full range of what we wanted to offer.”
“And the licensing regime, as it currently existed for traditional markets, was a shoe that didn't fit. We couldn't squeeze in,” she added.
Adrian Przelozny, the CEO of Australian and Singapore-based crypto exchange Independent Reserve (IR) echoed similar sentiments to Bowler, noting that the “upside of regulation far outweighs any risks.”
IR became the first Australian crypto exchange to obtain a Major Payment Institution License in Singapore at the start of October. Przelozny suggested that the firm’s registration under the Monetary Authority of Singapore’s licensing regime has significantly improved IR’s legitimacy in the eyes of its potential partners:
“I can tell you that being in a licensed jurisdiction is much better than being in an unlicensed jurisdiction. And this is because it really changes the conversations that we have with the partners that we get to work with.”
Przelozny highlighted that the “biggest challenge” for crypto firms in Australia is being able to secure good banking relations, with de-banking being a key issue in the local crypto climate. IR’s CEO stated that this may no longer be an issue once local companies can acquire the appropriate licensing.
“Over in Singapore, as soon as we got the license, we found the banking conversations completely changed and now the banks are approaching us to be their customer,” he said.