In our Crypto Around the World series, we take a look at the crypto landscape in different markets around the world, focusing on infrastructure, investment, regulation, and adoption.
This week, the spotlight’s on Australia – a country experiencing significant growth in its FinTech sector. Lauded for its progressive, innovation-enhancing regulatory guidelines, how exactly is the country creating fertile ground for the crypto world?
Australia’s FinTech landscape
Australia has experienced a five-fold increase in the number of FinTech companies in just five years. The country today boasts an assortment of startups in a variety of FinTech subsectors, with payments and lending by far the most developed in terms of the number of businesses and investment value.
The FinTech adoption rate echoes the surge in business activity; as of 2019, almost 60% of the digitally active adults in the country are considered FinTech adopters. According to Statista, “the alternative finance market is now valued at over 1.1 billion US dollars, with balance sheet business lending and P2P/marketplace consumer lending leading the charge.”
New South Wales is considered Australia’s main FinTech hub, with over half of all FinTech companies in the country headquartered in the southeastern state–it’s also home to the famous Bondi beach.
The significant advancement in the open-banking and open-data subsectors of the Australian FinTech landscape can be attributed in part to the passing of the Consumer Data Right (CDR) Bill in 2017. The Bill is expected to advance the digitisation of the country’s banking sector, while it’s also led to speculation as to how the cryptocurrency sector could disrupt banking throughout the country. A stone’s throw away, its neighbour, New Zealand has legalised “crypto wages”, which could be a sign of exciting things to come.
Crypto adoption in Australia
The use of crypto for payments in Australia have risen significantly in volume over the past few years, reaching a new record in February this year. According to Bitcoin.com, crypto-based merchant trade across the country reached almost $74,000* in February, up from $44,087.57 in January.
*All currency-related figures in the article indicated by $ refer to the Australian Dollar (AUD) unless stated otherwise.
In May 2020, it was announced Australians can buy Bitcoin (BTC) at more than 3,500 Australia Post offices across the country. According to Bitcoin.com.au, the new service was launched to promote cryptocurrencies to a mainstream audience, as well as to boost adoption among established businesses in the country.
Bitcoin.com.au customers are already able to buy Bitcoin at 1,500 retail outlets in the Blueshyft payment network, at 1,200 newsagents and using the online payment option, POLi to make BTC purchases via online banking.
Bitcoin.com.au CEO Holger Arians believes: “This is a major milestone for digital currency in Australia and around the world. It proves that there are established businesses and organisations that want to learn about new technologies by doing, and not by blocking.”
Another arrangement between Coca-Cola and Centrapay has facilitated the deployment of 2,000 Bitcoin-ready Coca-Cola vending machines in Australian and New Zealand. Coca-Cola announced customers are able to use an associated “Sylo Smart Wallet” with its vending machines through their smartphones or QR code.
(Above: Bitcoin-ready Coca-Cola vending machines, Small Caps)
The 2019 launch of Australia’s Independent Reserve Cryptocurrency Index (IRCI) is another bullish indicator, exemplifying the country’s appetite for crypto. According to its website, the Index examines Australia’s awareness, adoption, trust and confidence in cryptocurrency. With a score out of 100, the IRCI sets at a benchmark of 42. The website detailed that more than 1,000 Australians “from all walks of life participated” in the survey.
The IRCI says a score of 100 indicates full awareness, optimism, trust and adoption, meaning 42 is a relatively positive sign in terms of sentiment: “Many non-crypto-holding respondents indicated a strong likelihood for adoption over the next 6 months. At the current rate of adoption, we estimate more than 50% of Australians under 34 will own crypto in the next five years.”
The top insights from the survey were:
- 17% of Australians own crypto
- 1 in 5 Australians are likely to buy crypto in the next 6 months
- A third of regular investors spend $100 - $500 per month on crypto
- Majority of Australians (under the age of 44) believe crypto will be widely accepted by people and businesses
- Bitcoin is the most recognised and owned of all digital currencies in Australia
- More than 50% of millennials think crypto will be widely accepted in the future
- More than 50% of retirees think crypto will not be widely accepted in the future
- 73% of crypto investors hold Bitcoin (BTC)
Independent Reserve CEO Adrian Przelozny predicted the majority of millennials and Gen-Zs will own some crypto in the next five years, drawing parallels between cryptocurrency investments and the property market for previous generations. "Like the property market for the generations before them, younger Australians are seeing cryptocurrency as a method of increasing their overall wealth in the long term. As we see our market continue to mature, we should see the majority of millennials and Gen-z's owning some cryptocurrency in the next 5 years, which will truly move us into the mainstream investment category."
Central Bank Digital Currencies (CBDCs) have been a hot topic throughout 2020, with many countries around the world looking to create their own digital currency. While Australians shouldn’t hold their breath if they’re expecting the ability to purchase their coffee with a digital dollar, the wholesale industry’s use case seems more promising.
According to Ledger Insights, the Reserve Bank of Australia (RBA) has run a proof-of-concept for a wholesale CBDC. Its experiments were run on a private permissioned version of Ethereum, with the bank set to continue its exploration throughout the year.
In a submission to the Senate committee on financial and regulatory tech, the RBA wrote it had: “Established a small in-house Innovation Lab as a way to strengthen engagement with, and understanding of, new and emerging technologies that are relevant to its policy and operational responsibilities.” It continued, “The Innovation Lab is being used to explore whether there is a role for a digital Australian dollar – that is, an Australian central bank digital currency (CBDC) – in the context of the Bank’s responsibilities for issuing the currency and overseeing the payments system.”
The RBA’s Innovation Lab reportedly simulated the issuance of CBDC tokens to commercial banks, including the banks exchanging the tokens and redemption by the central bank.
In the paper submitted to the Senate, the RBA indicated that it didn’t envisage a retail CBDC. Its apprehension was substantiated in an example whereby in a crisis, a CBDC may be used as a substitute for commercial bank deposits, through which it feared the financial system would be at risk of destabilisation.
Like many other reserve banks around the world, RBA placed a greater focus on a wholesale digital currency limited to the financial sector. The paper mentioned, “A CBDC, possibly issued on a blockchain platform, would be a digital version of money which is a liability of the central bank rather than a commercial bank. Similar to cash and commercial bank deposits, a CBDC would be denominated in the sovereign currency and convertible at par with other forms of money,” it said.
This means that as it stands, the digital currency would be intended for use only by commercial banks to transfer money between them and settle balances. The RBA also stated it would be continuing its CBDC-focused work throughout the remainder of 2020, potentially bringing in outside partners when needed.
Keeping up with crypto regulations
Following a sharp rise in the use of crypto in Australia, the government has indicated a commitment to facilitate growth and innovation within the cryptocurrency sector, while also increasing its regulatory involvement.
The Australian Transaction Reports and Analysis Centre (AUSTRAC), the country’s financial intelligence agency and anti-money laundering (AML) regulator, has been regulating the crypto industry since April 2018.
A spokesperson for the regulator told Bitcoin.com that “Since April 2018 AUSTRAC has regulated digital currency exchange providers to minimise the risk of criminals using them for money laundering, terrorism financing and cryptocrime. Currently, there are 312 digital currency exchange providers registered and enrolled with AUSTRAC.” All digital currency exchanges are required to be registered with AUSTRAC before being able to provide services.
The Australian Securities and Investments Commission (ASIC) is responsible for regulating crypto assets and tokens that fall under the definition of financial products, including companies seeking to raise funds through initial coin offerings (ICOs). Additionally, companies need to hold an Australian financial services license, a requirement to conduct financial services businesses in the country. Additionally, since 2017, crypto has been treated as property in the country and is subject to capital gains tax.
According to Global Ledger Insights, currently, Australian law doesn’t equate digital currency with fiat currency and doesn’t treat crypto as money. However, in February this year an Australian court accepted that a crypto exchange account could be used as security for potential legal expenses, effectively recognising crypto as a form of investment.
The government hasn’t intervened in the crypto industry as much as China’s or South Korea’s, but it has clarified the application of Australian regulatory guidelines. In 2017, the government passed the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act which brought crypto and tokens within the scope of Australian anti-money laundering (AML) requirements.
Global Legal Insights believes “this recognised the movement towards digital currencies becoming a popular method of paying for goods and services and transferring value in the Australian economy, but also posing significant money laundering and terrorism financing risks.” It added, “The government has been widely supportive of the new technologies in the blockchain and crypto space.” This was evidenced in 2018, when the government committed $700,000 to the Digital Transformation Agency for the examination of potential blockchain applications within government services.
Interestingly, in 2019 the government drafted legislation regarding a $10,000 limit on the use of cash. The legislation came off the back of a recommendation from the Black Economy Taskforce on how to limit tax evasion and general criminal activity in the country. Forbes speculated that “Over the long term, the general push towards a cashless society, especially through government laws and regulations, can only help make the bullish case for the Bitcoin price.” The publication suggested the country was indirectly educating the public on why permissionless financial technologies like Bitcoin are valuable in the first place.
In 2019, the Australian government announced the development of a National Blockchain Roadmap. The roadmap details the country’s future plans to drive the long-term development and adoption of blockchain technology, to capitalise on the many economic and social opportunities it offers.
The roadmap predicts “blockchain technology will generate an annual business value of over $175 billion USD by 2025 and in excess of $3 trillion USD by 2030.” It also states the biggest blockchain sector is Financial and Insurance services, which is about 40% of the whole market. According to the roadmap, the government has provided support and funding for government, private sector and researchers, to foster collaboration around blockchain.
Noteworthy Aussie firms, startups and influencers
Tourism + Crypto = a match made in heaven
In August 2018, the government of the Australian province of Queensland announced it would issue a grant to a crypto startup as part of over $8.3 million of innovation funding. TravelbyBit’s objective is to boost tourism to the province through selling offers with cryptocurrencies and, in turn, creating more jobs.
Innovation Minister, Kate Jones said in a statement: “TravelbyBit has devised a clever way to make it easier for visitors to our state to pay for their purchases with a growing number of local businesses accepting cryptocurrency payments... I understand TravelbyBit is specifically targeting places like Bundaberg (along the Great Barrier Reef) – using cryptocurrency to make it easier for tourists to book holidays.”
The company also partnered with Brisbane Airport Corporation to launch the “world’s first digital currency friendly airport” and has already implemented a blockchain-based point-of-sales system in regional tourist towns. Co-founder and CEO, Caleb Yeoh said travelers can pay with Bitcoin (BTC), Litecoin (LTC), Dash, Ethereum, XEM and soon BNB.
Yeoh said: “We have more than 150 merchants across Australia using our system and this funding, to develop a purpose-built platform that will accept digital currencies from anywhere in the world, will allow us to add jobs not only directly to our team but also across the broader tourism industry.”
Naomi Brockwell is an Australian actress, producer and journalist hailing from Australia but based in New York. Brockwell (or “Bitcoin Girl”) has been creating YouTube videos about Bitcoin since 2013. She was a policy associate at the New York Bitcoin Centre from 2013 to 2015 and also produced a crypto-focused documentary named Bitcoin: The End of Money as We Know It.
She writes and produces privacy-centric content focused on decentralisation, the power of crypto and blockchain technology.
Emma Weston is the co-founder and CEO of AgriDigital, a company transforming the agricultural supply chain system. Weston was recognised as the Female FinTech Leader of the Year in 2017 and has been named a “Top 25 FinTech Influencer” by Finder.com.au.
Recognising supply chains as one of the most promising use cases for blockchain technology, Weston’s AgriDigital offers blockchain-based supply chain tracking in 34 countries, helping farmers buy, sell and store grain. Her passion is firmly rooted in advocating for democratic access to technology.
Schebesta also launched HiveEX.com, a global OTC and brokerage desk specialising in large order crypto trading. He’s also launched a spin-off offering called HiveSpend, a platform through which Aussies can pay for their bills. He’s reportedly also working on establishing Australia’s first crypto bank, with a broad variety of financial management tools.