Notes from Blockchain Week

Blockchain Australia, the national industry body, recently organised the first National Australian Blockchain Week – a mix of on-line and in-person events, hosted in Sydney and Melbourne. Overall, it was an impressive line up of speakers and topics, featuring key local figures and presenting some intriguing announcements from politicians, regulators and practitioners alike.

The recurring themes were: Regulation, Tax and Innovation.

Despite past pronouncements about adopting a light-touch regulatory regime when it comes to Blockchain technology, the absence of definite regulation risks stifling innovation and/or driving projects overseas to more receptive jurisdictions. (Irony of the week #1: contrast this with the early and positive regulatory engagement with Digital Currency Exchanges (DCE) and other market participants in Australia, not to mention previous progress in removing the absurd GST treatment on the purchase and sale of cryptocurrencies).

Now, the industry is (once again) asking policy makers: to clarify the law as it relates to decentralised protocols, digital assets and utility tokens; to streamline the confusing and over-complex tax system as it applies to DeFi: and to define a specific regulatory boundary (rather like the UK’s FCA perimeter) within which crypto assets need to be regulated. Sadly, the latter is extremely hard to acheive thanks to the very broad definition of “financial product” within the Australian Corporations Act.

Throughout the four days, there were several highlights: Senator Bragg’s keynote speech on driving the policy agenda to bring clarity to regulators and markets alike; a progress report on the National Blockchain Roadmap; tax and legal updates from Joni Pirovich and Michael Bacina; a showcase of local Blockchain start-up projects (more on that next week); and a couple of enterprise presentations on the ASX’s DLT replacement for CHESS and the Blockchain-based insurance project between the R3 consortium and Grow Super. But apart from a couple of other Blockchain-in-business sessions, there was a noticeable absence of corporates, major banks, traditional financial services and institutional investors.

There was a lot of commentary around the fact that many Blockchain businesses and crypto projects still find it challenging to access regular banking facilities in Australia (Irony of the week #2: Westpac’s windfall from the recent Coinbase IPO). There was also a lot of discussion about the need for investor education before crypto and digital assets can go “mainstream” – which I find surprising when plenty of people seem to be finding their way without any help from traditional financial advisors, and yet no-one is required to educate themselves before their money is put into compulsory superannuation or real estate assets. Even where crypto assets are being included in retail investor products, the allocation is very modest and is being transacted offshore (see Raiz’s 5% allocation via the US-based Gemini Trust). Why not use one of the several established and well-run exchanges, crypto funds and OTC providers here in Australia?

Regarding the potential offshore brain drain, much was made of the work that Singapore is doing to attract Blockchain and crypto businesses. But I think the focus on Singapore risks overstating the situation there, and overlooks what is actually happening (and could happen) in Australia. For example, while Singapore may have more favourable tax arrangements for new Blockchain projects, I understand that ordinary retail investors don’t have access to crypto funds (not even ETPs). The Singaporean issuance of digital assets via tokenisation has to be done via an SPV structure. And while many ICOs have been issued from Singapore, they could not be marketed to local investors. At least Australia has a robust DCE sector, e.g. Independent Reserve, BTC Markets, and Bit Trade (now part of Kraken); early on we saw some very successful retail products such as CoinJar; and the local industry continues to nurture innovative decentralisation projects – we just need to sort out those “policy settings”, and give more encouragement to local entrpreneuers and innovation. (Irony of the week #3 – when former ALP politician and self-styled crypto OG, Sam Dastyari, was asked if the private equity fund he works for was investing in Blockchain or crypto, there was a deafening silence…)

Finally, one of the main benefits of Blockchain Week has been to entice people out of hibernation, and to attend in-person events after months of lock-downs and restricted movement. It felt good to be back.

Next week: Blockchain Start-up Showcase