In a TRM Labs webinar today with TRM Policy Lead Angela Ang, Steve Vallas, Ari Redford and Joni Pirovich, Brad Brown of AUSTRAC confirmed that Australia is home to 400 registered digital currency exchanges ranging from multi-national exchange operators right down to sole operators.
Angela Ang noted that ASIC had highlighted the popularity of crypto-assets with Australians, but Steve Vallas shared some insights that the local Australian market is:
Dominated by a narrative of scams, at the expense of the international opportunity...when I ran the Digital Asset Conference, we brought businesses that are international... to show how they can work.
geography used to matter a lot more now, but it's just data packets, historically [Australia's] weakness has been our geographical location.
Joni Pirovich said:
There's still a significant education gap which is still to be bridged.
Brad Brown said:
[AUSTRAC] collect a lot of information with annual reports... we are seeing at the medium business a lot of outsourcing of AML obligations, which is not necessarily a bad thing... we have been trying to bring [the larger entities] into the tent... with AUSTRAC's fintel alliance.
Angela Ang said:
From my time at MAS, the crypto companies and regulators started speaking different languages and it takes time... for a conversation to happen.
On the topic of financial crime Mr Brown said:
There is plenty of crime that relates to the use or misuse of cryptocurrency or criminals who seek to use crypto via layering or placement, across multiple different crime types, cryptocurrencies are just another medium of use that can be laundered or moved internationally.
TRM Labs has analyzed the reported Australian criminal cases which referred to crypto-assets, identifying an increase in criminal use of crypto-assets being prosecuted.
TRM identified that the use of crypto was considered an aggravating factor by courts in sentencing, showing that criminals using crypto is a more sophisticated action by criminals and hence requiring a greater punishment. Importantly TRM also found that offenders were caught with 'traditional policing methods' and not necessarily from blockchain analytics, but that in a couple of causes there was undercover work to break into darknet markets.
Mr Vallas made a valid point on the power of Government in signaling a welcoming approach to innovation:
Overseas jurisdictions are putting forward a supportive narrative, Singapore in particular has a pathway ... for people to succeed... in Dubai there are signals with VARA ... Australia is lacking signaling from Government and businesses at a minimum are looking at other jurisdictions... I speak to a lot of lawyers who say businesses are asking 'what is a welcoming jurisdiction' and that's not Australia.
Ms Ang observed:
The industry wants clarity on what is expected by regulators ... [in jurisdictions] where they can get that the industry is willing to put in the work and engage. We need proportionality as well, [when] we apply the Financial Stability Board's same risk same regulation framework it has to be done in a thoughtful way, [because] how this looks in practice can be very different, while the law can be technology neutral, it is important that the actual application has to be mindful because of these differences.
In closing Mr Brown said:
AUSTRAC will keep investing in preparing reports so there is more information available to the public.
As Australia likely moves towards a regulatory framework under the existing Australian Financial Services Licence regime, it will be essential to have a thoughtful application of nuanced requirements to this new technology if the blockchain innovation happening around the world is to find a home in Australia.