Blockchain technology has the potential to "fundamentally change" our financial system by allowing disintermediation, reducing transaction costs and improving market access, according to the Australian Securities and Investment Commission (ASIC). But in order to get the full benefit of this technological advance, regulators should not be "standing in the way of innovation and development."
In a keynote delivered at the Carnegie Mellon University, Greg Medcraft, Chairman at the ASIC, said that blockchain technology could positively transform capital markets by bringing more efficiency and speed.
However, the technology does not come without risks. Thus, policymakers will play a decisive role, as they will need to build an adequate regulatory framework that mitigates risks while not stifling innovation, he said.
"Right now, we don’t know exactly how blockchain or other disruptive technologies will evolve," Medcraft said. "But, for now, it is fair to say that they will," adding:
"Blockchain potentially has profound implications for our markets and for how we regulate."
Regulators and policymakers will need to ensure that they are "harnessing the opportunities and the broader economic benefits" of blockchain technology, he said, while "not standing in the way of innovation and development."
"Naturally, harnessing this potential will depend on the integrity, capacity and stability of blockchain technology and processes," Medcraft continued.
"It will also depend on industry’s willingness to invest in, and make use of, new ways of settling and registering transactions. The potential is, nonetheless, enormous. Industry is seeing that potential and is looking to see how it and the markets might benefit."
According to him, blockchain technology could potentially transform capital markets by automating the entire buy and sell process, and eliminate the need of trusted third parties.
As our economy moves toward the digital age, the ASIC will help providing education, guidance as well as surveillance and enforcement.
"We are supporting investors and financial consumers in understanding the opportunities and the risks of participating in the digital economy," Medcraft said. "We monitor the market and understand how investors use technology and financial products and the risks that arise."
As part of the authority's efforts to foster the local fintech startup scene, ASIC has established in April, an "Innovation Hub." The initiative aims to help financial technology startups navigate the regulatory landscape.
"ASIC's Innovation Hub will provide innovative start-ups with informal assistance throughout the early stages of their development," the official webpage reads.
In August, an Australian government inquiry recommended treating digital currency as money in order to simplify tax for people who traded with them. The initiative sought to change the current tax codes for bitcoin in Australia and establish similar standards as in countries such as the UK, Canada and Singapore.