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‘Not a fad’: Digital Economy Minster argues policymakers should embrace crypto

‘Not a fad’: Digital Economy Minster argues policymakers should embrace crypto

Leaders from across the Australian crypto market say Senator Jane Hume’s calls for a cautious embrace of crypto assets should send a “very strong signal” to policymakers and the market alike after the RBA labelled the asset class a “fad” last week. 

In an address to the Australian Financial Review’s 2021 Super & Wealth Summit on Monday, Senator Jane Hume said both industry and government leaders “need to acknowledge” that crypto is “not a fad”, urging policymakers to tread cautiously but not fearfully.

“Don’t be the person who thought the iPhone would never take off because people would prefer to have their music and telephone on separate devices,” Hume said. “Don’t be the person who was still doing their financial models by hand in 2001, rather than using Excel.”

“Don’t be the person in 1995 who said the internet was just a place for geeks and criminals and would never become mainstream,” she said. 

The Senator’s address arrived just days after Tony Richards, the Reserve Bank of Australia’s outgoing head of payments policy, delivered his final overture at the central bank, warning economists that the widespread uptake of crypto is a “fad” destined to fade away. 

He predicted that, in future, investors will become more risk averse, and consumers looking to use crypto assets as currency will be more likely to lean toward stablecoins or fiat currencies like CBDCs issued by a regulated body. 

Unsurprisingly, the market disagreed. Steve Vallas, CEO of Blockchain Australia, said the central bank’s position isn’t one reflected in market data, but instead a line borne of outmoded narrative arcs in need of “sophisticated” consideration.

Vallas said that, on the other hand, Hume’s speech went a long way in demonstrating that investors and stakeholders from across the market should really be taking crypto seriously if they aren’t already. He was encouraged that crypto had finally found a home at Treasury.

“No one’s just decided off the cuff to make this statement — it should be a strong signal to boardrooms and corporations across the country that this is subject matter that has reached the top of government,” Vallas told Business Insider Australia. 

The speech was a natural progression from the wave of advancements seen across the space over the last month or so, he said. 

Late last month, ASIC gave tentative approval to fund managers looking to launch crypto exchange traded funds, with underlying crypto assets currently limited to Bitcoin and Ethereum. 

Weeks earlier, Liberal senator Andrew Bragg also made moves to convince policymakers to legislate for the space in Australia to stop Australian-based digital currency exchanges from decamping to the UK and Singapore as a result of insufficient regulatory frameworks.

Blockchain Australia, where Vallas serves as chief executive, worked in close consultation with the senate committee charged with handing down the recommendations. And Vallas said that what he’s learned is that nobody outside of the market really understands it. 

“Every conversation I’m having, there’s no department, no company, who understands this well enough,” Vallas said. “The smart thing to do, and the thing that we’ve been encouraging is, let’s get these conversations happening in rooms where different views are all surfaced.”

“To have this kind of conversation, I think the framework that is the consumer facing side, the big deal is consumer protections, front and centre [of what everybody’s saying] is the path to a licencing regime is something I think which will largely address the concerns that people have that this is in an unregulated space,” he said. 

The same enthusiasm could be heard across the market. Asher Tan, CEO at CoinJar, said it was nice to hear Senator Hume say aloud what has become increasingly obvious all over the world: “Crypto is here to stay”. 

“Between Senator Hume’s speech, the Bragg report and the Commonwealth Bank’s move into crypto, we certainly hope that local players are beginning to recalibrate their plans and perceptions around cryptocurrency,” Tan told Business Insider Australia.

“While crypto’s day-to-day price volatility often dominates the headlines, moves like these show us that crypto as an asset class has reached a critical mass. Like the advent of the internet itself, now is the time for companies to position themselves for what’s coming next.”

Tan was unsurprised by the position taken on crypto by the RBA last week — consistent with its posture since the asset class emerged in Australia — but insisted that regulation and clear consumer protections were something his firm, and the rest of the market, actually wants.

“It certainly felt dismissive of something that literally millions of Australians are already invested in,” Tan said. “We’d hope that a good faith attempt to understand the who, how and why of this remarkable phenomenon should be the foundation of any discussions going forward.”

The phenomenon wasn’t lost on Joe Longo, chair of the Australian Securities and Investments Commission, who made a rare appearance shortly after Hume at the same summit. 

“The fact Australia’s largest bank is already proposing a means of crypto exposure for its retail customers is telling,” Longo said. “Yes, it’s only a pilot project, but the overall direction is clear. This debate is no longer on the fringes of the financial services industry.”

Peter Crump, a senior consultant at BDO’s Private Wealth division, told Business Insider Australia that these recent events are likely to trigger movement in the Australian market, where institutional investors are already waiting for the other shoe to drop. 

“It’s no different to when a listed investment company is on the cusp the ASX 50, and once they reach the ASX 50, then all the index managers who only invest in ASX 50, for example, have an obligation to take it up,” Crump said. 

As we see more ETFs and other products… there’ll be a tipping point where investment managers will say, ‘Either we need to be in this or permanently out of it’,” Crump said. 

“We’ll get to a tipping point where there’ll be sufficient momentum that traditional mainstream fund managers will say, ‘Should we even be including cryptocurrency in our alternative segment? And once a couple of investment managers do that, we’ll get a flood of everybody else saying, ‘If we don’t do this, we’re going to miss out.”

Author:

John Buckley is a Senior Reporter at Business Insider Australia.

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