Bitcoin, ether, dogecoin – Chalmers says the future may be crypto

Cryptocurrencies such as bitcoin will help drive modernisation of Australia’s financial system, Treasurer Jim Chalmers has declared while revealing the re-election of Donald Trump has already forced a rethink of the emerging sector’s importance.

Chalmers said while there were legitimate concerns such as the use of crypto by criminal elements, the possible advantages from the creation of new investment opportunities should not be curtailed by overzealous regulation.

Cryptocurrencies such as bitcoin have attracted even more interest since the re-election of Donald Trump.Credit: Bloomberg

Cryptocurrencies, which encompass digital currencies that are effectively policed by investors rather than authorities such as governments or central banks, were already one of the world’s fastest-growing investment opportunities before Trump’s election victory in November.

Trump has promised to be a “crypto president” by loosening regulation around products, creating a stockpile of bitcoin – the value of which has surged by a third since November – and making it easier for crypto investors to gain access to traditional banking systems.

In Australia, broad investment in cryptocurrencies is still well short of traditional sectors such as equities and property, but there is growing interest, particularly among younger people.

Chalmers said he believed crypto, and the infrastructure surrounding it, could be a key feature of an improved financial system.

“I think crypto has a role to play, and it’s part of modernising and innovating in our financial system,” he said.

“We need to make sure there are appropriate protections and guard-rails, but we need to make sure we don’t overdo that and stomp on part of the industry which, I think, will be important in the industry.”

Last month, RBA governor Michele Bullock, who previously headed up the bank’s payments arm, was less bullish than Chalmers about cryptocurrency and said she didn’t see a role for it in the economy.

“I don’t really see a role for it in, certainly in the Australian economy or payments system,” she said.

Governments, central banks and policymakers around the world are watching Trump’s policy agenda with particular interest, given he has promised to impose wide-scale tariffs, deport millions of undocumented workers and possibly intervene in official interest rate settings.

Chalmers said Trump’s approach to crypto was also uppermost in the government’s mind.

“Of the list of changes in policy emphasis we expect from the incoming Trump administration, this is one of the ones we’ve spent a lot of time thinking about,” he said.

“We think about trade and tariffs, we think about financial regulation, we think about deregulation more broadly. We think about the energy transformation, and we think about crypto.”

The government is planning to introduce legislation next year that would create licensing arrangements for businesses that offer digital assets such as crypto and stablecoin – a type of cryptocurrency pegged to the value of another currency or commodity.

The licensing is in part due to growing crypto-related scams that were estimated last year to have cost Australians about $180 million in losses. AUSTRAC this month warned that it believed specialist crypto ATMs were being used by criminal organisations in South-East Asia to launder the money of Australian-based criminals.

Treasurer Jim Chalmers believes cryptocurrencies will drive modernisation and innovation across the nation’s financial system.Credit: Alex Ellinghausen

Chalmers said regulations around crypto had to balance security issues for potential investors in the asset class against being overly onerous.

“Our interest here is to recognise it’s legitimate, it’s important, it’s growing,” he said. “We need to make sure that people are protected, but we don’t want to overdo it in a way that stifles an industry we believe in.

“Obviously, the multinational crime element of it is something people are focused on with good reason, but I think we would be doing ourselves a disservice if we overfocused on the downside and didn’t sufficiently focus on the upside.”

One of the downsides is the use of crypto by criminals attracted to the way its underlying technology makes it difficult to track major financial transactions. In some cases, criminals have demanded ransom payments in crypto.

This masthead can also reveal that cryptocurrency assets are increasingly being seized by the Australian Federal Police as part of their inquiries.

Between July and November this year, the AFP had collected more than $20 million worth of crypto. Over the same period, more than $28 million in cash was seized by the AFP’s criminal asset confiscation taskforce.

All seized cash goes into an account used for community safety programs.

The AFP has collected $62 million in crypto since the middle of 2019.

The value of that crypto may be growing. Once the AFP collects it, the agency does not track the ongoing value of the crypto (which is managed by the Australian Financial Security Authority).

Since July 1 this year, the value of bitcoin has soared from $US63,352 to $US97,742. As recently as December 17, bitcoin had reached $US106,470.

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