Without a doubt, we’re at the forefront of a global paradigm shift as we move towards a future backed by blockchain. Although cryptocurrencies have been around for more than a decade now, recent rollercoaster market movements and cybersecurity events raise concerns over the mainstream adoption of these digital assets.
As with any emerging technology or industry, governments around the world are interested in ensuring cryptocurrencies are safe for the people that benefit from them. Australia’s new Labor government is no different, and is now acting to put measures in place to protect citizens from the dangers of the crypto world.
In August this year, the Australian government announced it is looking at carrying out a world-first “token mapping” exercise as a measure to protect the individuals that own cryptocurrencies. That was a timely move as the Australian Securities and Investments Commission (ASIC) recently revealed that 44% of Australians have owned cryptocurrency assets at some point in their lives.
So, what is token mapping? And why is it important?
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To understand token mapping, we first have to understand the definition of a “token”. A token is effectively a digital asset built on blockchain technology. There are various token categories, such as security tokens, utility tokens, currency payment tokens and non-fungible tokens (NFTs). Each type of token holds its own characteristics — for example there are tokens that provide financial returns to holders, those that facilitate an ability to pay, or tokens that represent a piece of property, or work of art.
By taking stock of certain types of tokens — especially those related to financial exchange or transactions — through token mapping, the government endeavours to standardise terminology around cryptocurrencies, formally define what these tokens do, and set licensing and custody rules. To achieve these goals, the Australian government is now aiming to produce a consultation paper by the end of 2022, with work likely to continue into 2023.
Australia needs crypto regulation
I’m in favour of the government’s work in this space. As the CEO and co-founder of a blockchain-based fintech, you might wonder why I’m in favour. Won’t regulation stifle our work and innovation in this industry as a whole? I’m confident it won’t — and in fact, it’ll benefit everyone involved.
The reason is simple. The Australian government is seeking to protect everyday consumers from the perceived dangers of a relatively new technology, and Block Earner is looking to build confidence in an industry that we believe is the future of finance. The way to achieve both of these goals is, in part, through regulation.
So far though, it’s fair to say that regulation has struggled to keep pace and adapt with the crypto asset sector. The less regulated something is, the more risky it is likely to be perceived. So, as crypto assets start to become household names, it’s necessary to make sure that consumers are well informed on where they place their trust and finances.
Token mapping provides a fantastic solution for our sector. It not only provides greater clarity for crypto investors, but also the opportunity for organisations to develop their own blockchain-based innovations to a market that will have better confidence in them. With the means to develop more appropriate regulatory frameworks, Australia could be on its way to developing an AUD-based stablecoin, which, if created within the right framework, could improve the efficiency of our financial institutions and increase our connectivity across international markets.
Innovation and protection can coexist
Australia is leading innovation in the crypto space — our country ranks fourth out of 26 countries in crypto adoption. With this fast-growing uptake, some may argue that token mapping in any form is likely to stifle innovation. Over-regulation can certainly be problematic and raise concerns for entrepreneurs in the space, for example in Japan where investors and startups have been jumping ship to start their businesses elsewhere.
Much like Japan’s crypto licensing regulations, Australia’s token mapping, if executed poorly, runs the potential risk of shutting out lucrative innovation and growth across the sector. For instance, a blanket ban on certain token types could prevent Aussies from investing in the next big blockchain innovation. Or if the government’s token mapping lacks clear definition, it could risk miscategorising the lesser-known but high-potential, early-stage ventures. Or, even worse, if the government only maps a limited list of top tokens, it could prevent certain tokens from appearing on Aussie exchanges. If that happens, people are likely to find ways to invest in these tokens on other international platforms, taking money out of the Australian economy.
Clearly, we’re in an arms race for consumer protection regulation. But with The Committee for Economic Development of Australia spearheading a report on the dire state of Australian innovation and industry development, we are simultaneously in an arms race for innovation. The only way to balance these two opposing parties is by including crypto veterans and experts in the lawmaking process. This will ultimately allow both the government and the Australian crypto community to come together in a mutually beneficial way, supporting both consumer safety and innovation in equal measures.
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