Since Bitcoin was first launched back in 2009, there have been widespread calls for regulation from the global financial industry.
While it flies in the face of crypto’s decentralized nature, several countries have taken important steps. In the USA, for example, cryptocurrency exchanges fall under the scope of the Bank Secrecy Act (BSA).
Now, another major westernized economy is set to take action of its own. Australia has a booming $1 trillion crypto sector, none of which is currently regulated.
This could be about to change soon, though, with the country’s chancellor announcing a national ‘stock-check’ of crypto assets, known as ‘token mapping’.
What is token mapping?
Just as a standard geographical map charts the location of important roads and landmarks, a ‘token map’ shows the characteristics of all digital asset tokens and where they are being held.
While the average crypto user typically has a small amount, which they might use for everyday transactions like buying music online or depositing money in an online casino, authorities are much more likely to be interested in the ‘whales’, holders who stash huge amounts of crypto away in the form of valuable online assets.
Knowing where these are and who has them is of huge use to governments keen to stop powerful individuals from causing crypto waves and potentially unsettling the economy. It’s also the first step toward regulation.
The Australian government treasurer Jim Chalmers issued a statement in which he stated the need to keep crypto consumers ‘adequately informed and protected. With crypto ads currently ‘plastered all over big sporting events, as he put it, the announcement reflects a national demand for more regulation.
What Australian crypto battle entails
Like many large countries, Australia has an uneasy relationship with crypto.
The country’s government has debated on how to regulate digital currencies, which is outside the scope of central banks and in the hands of decentralized computer networks, for several years. However, it was only with the outbreak of the pandemic in 2020, that it started to take concrete steps.
Remote working and stimulus payments, often acting as free cash for businesses that were home-based anyway, fed into the crypto boom which saw major cryptocurrencies double, triple, or even quadruple in value.
The country’s previous conservative party managed to pass a motion that introduced new wide-ranging regulations to shield crypto owners from harm, but this fell through when they lost the subsequent May election.
However, this hasn’t stopped the Australian Securities and Investments Commission (ASIC) from demanding the implantation of the new rules, citing its research that found almost half of the nation’s retail investors held crypto stock in late 2021.
What it means for Australia’s future regulation
When the crypto market topped $3 trillion last year, the race for regulation accelerated in many countries.
Some major players, such as China and India, partially or fully banned the trading and use of digital currencies, and instead attempted to launch their virtual coins, such as the digital yen.
Yet, many countries, mainly those with westernized economies, sought to map out a staged process, where certain parts of the sector were regulated before others.
In Australia, the first stage appears to be token mapping, which, if successful, would surely lead to more detailed regulation, similar to that outlined in the pre-election motion. It would follow a detailed framework, although the new government has said that its crypto approach will be more ‘nuanced, cautious and research-heavy than that of the previous administration.
Is global regulation possible?
Universal crypto laws may seem like a pipe dream, but institutions as important as the International Monetary Fund (IMF) have called for unifying measures.
Three IMF experts stressed the need for cross-border collaboration in December last year, just after the crypto market swelled to its $3 trillion peak. They warned that digital currencies could dramatically affect the stability of the international financial system and only with a global framework could the world economy weather the storm.
The approach included the use of crypto asset service providers, a detailed list of requirements set out to govern the uses of the coins, and official standards for government-regulated companies to follow with their crypto investments.
Yet, there have been no firm plans drawn up to realize the IMF’s ambition, with most of the world’s major economies following different plans based on their crypto outlook.
Australia’s new token mapping policy, though, marks a major move for a big economy. If successful, it could lead to a new era of crypto regulation.
