Crypto, blockchain missing from budget despite need for regulation

Last week’s federal budget was somewhat of a surprise, providing more than we expected for small and medium-sized businesses and startups. This included a $392 million industrial growth program, the expansion of the immediate writing of assets, halving PAYG and GST installments, and more. There was a hell of a lot in there, and some stuff that was free. This included cryptocurrency and blockchain.

In fact, there was not a single mention of either “cryptocurrency” or “blockchain” in any of the federal budget papers. And we haven’t been able to get an answer as to why.

For some, this will be a cause for celebration. There are many people who are skeptical about the space, especially because of amount of fraudit FTX debacle, and even collapse of Silicon Valley Bank (SVB) which had a fair amount of exposure to cryptocurrency.

Still, defenders of the space are adamant about its importance for the future.

“After the collapse of FTX, blockchain technology has a greater challenge to build a case for public investment than other innovations such as quantum and AI, which border on sci-fi, but we would urge the government to keep an open mind,” Jason Titman, Swyftx COO, said in an email SmartCompany.

Titman applauded Labour’s investment in technology in this budget, but still championed the use cases for blockchain technology.

“We have short-term things we can do with blockchain technology in areas like payments, disintermediation and supply chain management that can drive growth and productivity.

If you intend to be in business in the next five years, you will almost certainly need to learn how to embrace blockchain technology and crypto. Tokenization, nuclear settlement, smart contracts. These blockchain advances are going to revolutionize business at every level.”

The need for cryptocurrency regulation

While it was always highly unlikely that cryptocurrency and blockchain would receive a funding injection in the 2023 budget (they were also missing from the October and March 2022 budgets), it’s not exactly a sector that Labor has ignored.

Last week we theorized that there would perhaps be some cost calculations within the budget with regard to regulation due to The Australian Securities and Investments Commission (ASIC) is increasing its focus on cryptocurrency and digital assets.

In addition to this, back in August the Labor Party announced its token mapping programto “help identify how cryptoassets and related services should be regulated”.

“Our government is ready to start consultations with stakeholders on a framework for industry and regulators, which allows consumers to participate in the market while better protecting them,” Treasurer Jim Chalmers said at the time.

Labor released its Token Mapping consultation paper in February 2023, with Chalmers and Assistant Treasurer Stephen Jones announcing that ASIC would also expand its cryptocurrency compliance team.

We expected to potentially see these costs in the budget. We were wrong.

Quiet on crypto

SmartCompany contacted Stephen Jones’ office for comment about cryptocurrency being absent from the budget. While the office initially said they would respond in time for our deadline, it has now gone silent.

Senator Andrew Bragg, who has been incredibly vocal about cryptocurrency, also did not respond to a request for comment. Nor did he mention crypto in his own budget response last week.

In 2021, Senator Bragg chaired a Senate committee that submitted a report on digital assets, including cryptocurrency regulation.

Then again, it’s perhaps not surprising that crypto and blockchain were missing from the budget.

But the lack of response is curious, especially as Labor was quite critical of the Morrison government’s handling of cryptocurrency.

“The previous government bet on cryptopolitics but never took the time to future-proof our regulatory framework to protect consumers and guide this new and emerging asset class,” Chalmers and Jones said in a joint statement back in February.

“We are acting quickly and methodically to ensure that consumers are adequately protected and true innovation can flourish.”

IN budget 2020-21offered the coalition $6.9 million over two years to support “industry-led pilots to demonstrate the use of blockchain technology to reduce regulatory compliance costs and encourage wider adoption of blockchain by Australian businesses”.

Perhaps a generous reading would be that Labor is erring more on the side of methodical at the present time.

We cannot ignore this in Australia

Meanwhile, crypto and blockchain have not gone away – despite the 18-month “crypto winter” that has coincided with the global economic slowdown, interest rate hikes and the war in Ukraine.

While AI may have become ‘Web 3’ by 2023, the space still needs to be resolved.

In addition to the issues listed above, in the past six months ASIC has come down hard on three Australian cryptocurrency platforms – Block Earner, Swyftx and Finder Earn — for offering what it claims, among other things, were unlicensed financial services.

All of these were “earn” products that allow users to transfer Australian dollars to specific cryptocurrencies and stablecoins, and lend them to the platforms.

These models are similar to bonds, but with a more frequent interest payment – usually daily. The annual percentage rate of return (APY) for each asset also tended to be higher. In general, they were between four and 10%, although some were higher.

It is of course entirely possible that we will soon hear an update from Labor on the token mapping and ASIC plans. It certainly seemed to take these things seriously at the time.

In the meantime, we wonder about the current tight lips.