Crypto and blockchain were missing from the budget despite continued need for regulation

Last week’s federal budget was somewhat surprising, offering more than we expected for SMEs and startups. This included a $392 million industry growth program, the extension of the instant asset write scheme, halving PAYG and GST instalments, and more. There was a hell of a lot in there, and some things that were gratuitously absent. This included cryptocurrency and blockchain. 

In fact, there wasn’t 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 on why.

For some, this will be a cause of celebration. There are plenty of people who are skeptical of the space, particularly due to the plethora of scams, the FTX debacle, and even the collapse of Silicon Valley Bank (SVB) which had a fair amount of cryptocurrency exposure.

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

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

Titman applauded Labor’s investment into tech in this budget, but still advocated for the use cases for blockchain tech.

 “We have near-term things we can do with blockchain technology in areas like payments, disintermediation and supply chain management that can power 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 tech and crypto. Tokenisation, atomic settlement, smart contracts. These blockchain advances are going to revolutionise business at every level.”

The need for cryptocurrency regulation

While it was always wildly unlikely that cryptocurrency and blockchain would get 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 been ignoring.

Last week we theorised that perhaps there would be some costings within the budget in regard to regulation due to the Australian Securities and Investments Commission (ASIC) ramping up its focus on cryptocurrency and digital assets. 

In addition to this, back in August Labor announced its token mapping program, to “help identify how crypto assets and related services should be regulated”.

“Our government is ready to start consultation with stakeholders on a framework for industry and regulators, which allows consumers to participate in the market while also 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 those costings laid out in the budget. We were wrong.

Quiet on crypto

SmartCompany reached out to 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 quiet.

Senator Andrew Bragg, who has been incredibly vocal about cryptocurrency, also didn’t respond to a request for comment. He also didn’t mention crypto in his own budget reply last week.

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

Again, it’s perhaps not that strange that crypto and blockchain were missing from the budget. 

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

“The previous government dabbled in crypto policy but never took the time to future‑proof our regulatory frameworks to protect consumers and guide this new and emerging class of assets,” Chalmers and Jones said in a joint statement back in February.

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

In the 2020-21 budget, the Coalition offered $6.9 million over two years to support “industry-led pilots to demonstrate the application of blockchain technology to reduce regulatory compliance costs and encourage broader take-up of blockchain by Australian businesses.”

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

We can’t ignore this in Australia

In the meantime, crypto and blockchain haven’t gone away — despite the 18-month-long ‘crypto winter’ that has coincided with the global economic downturn, interest rate rises and the war in Ukraine.

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

In addition to the problems listed above, the last six months have seen ASIC come down hard on three Australian cryptocurrency platforms — Block Earner, Swyftx and Finder Earn —  for offering what it ia alleging were unlicensed financial services products.

All of these were ‘earn’ type products that allow users to transfer Australian dollars into specific cryptocurrencies and stablecoins, loaning them to the platforms. 

These models are similar to bonds, but with a more frequent interest payout — generally daily. The Annual Percentage Yield (APY) of each asset also tended to be higher. Generally, they sat between four and 10%, though some were higher.

It’s of course entirely possible that we’ll hear an update from Labor about its token mapping and ASIC plans soon. It certainly seemed to be taking these things seriously at the time.

In the meantime, we’ll be wondering about the current tight lips.