The Australian Financial Review’s inaugural Cryptocurrency Summit will put cryptocurrency under scrutiny. In just over a decade, we have seen the evolution of cryptocurrency and blockchain technology as it transformed from a digital medium of exchange to a store of wealth, investment class, and more recently, a critical source of value. It is imperative that those of us in the industry share what we have learned with the wider community here in Australia.
Bitcoin—the original cryptocurrency—was created by the pseudonymous Satoshi Nakamoto as a way of exchanging money between two people without an intermediary. The advantages of this technology are its low costs, transparency, unchangeability, near-instant speed and security. While many around the world use bitcoin for transactions, it has also become a store of value and often referred to as ‘digital gold’. Since its invention, thousands of cryptocurrencies have been born, all underpinned by blockchain technology that serve a wide array of user needs. Many of which have formed this new and exciting asset class.
The power of cryptocurrency has become so much more, as evidenced in recent times during the war in Ukraine—a country that despite its economic hardships, ranked 4th in the world for cryptocurrency adoption. Recently, the Ukrainian government passed a law to create a legal framework for cryptocurrency. They were also on the receiving end of crypto donations totalling more than 70 million USD to fund humanitarian aid and the fight against the Russian invasion. The benefits of cryptocurrency have extended to civilians also; in light of the banks collapsing and the inability for civilians to withdraw money for basic needs, the sending of cryptocurrency by family and friends has proved a lifesaver.
On the other side of the coin is the question about more negative issues. These may include connections to money-laundering and sources of energy consumption. Criminals have used stores of value like the USD or artwork to profit from their crimes for many years. Cryptocurrency is similar except for one stark difference. Unlike the traditional banking system, cryptocurrency exists on a transparent blockchain. This means authorities can track and trace all transactions, forever. Using these analytical tools, Chainalysis found in 2021 that illicit cryptocurrency activity totalled just 0.15% of crypto transactions; this, despite the significant increase in usage.
Bitcoin mining energy consumption is an ongoing issue. When it comes to energy sources, we want our homes, and lifestyles, to be as clean and green as technologically possible. Akin to the introduction of unleaded petrol, the onus of responsibility at that time wasn’t placed on vehicle owners. Rather, it was for the energy sector to address. The cryptocurrency industry joins the voices of others in our community. We recognise that efficient renewable energy use will reduce the impact of carbon emissions while also reducing costs. In fact, we are already seeing powerhouse players taking steps towards making this happen: Exxon Mobil is trialling the use of excess natural gas that would otherwise be burned off from US oil wells to power cryptocurrency-mining operations—a key step as our industry matures and innovates towards bigger and better things.
With an eye to the future, last week Australia hosted Blockchain Week organised by peak industry body Blockchain Australia. Headlining the event were Senator Bragg and Minister Hume, both champions and proponents of cryptocurrency regulation in Australia. Minister Hume compared cryptocurrency to a new virtual frontier, similar to the Victorian Gold Rush of the mid-1800s. In her speech, she stated that our digital economy could add “2.6 percent to GDP and create around 200,000 new jobs by 2030.” The Minister followed up to say that Australia is open for business and leaning into the digital opportunity. This includes crafting a suitable regulatory regime that is risk-based, and technology neutral. Senator Bragg announced the Digital Services Act, a principles-based piece of legislation, regulated by a government minister. The Senator also addressed the complex issues of Decentralised Autonomous Organisations (DAOs) and a review of the Australian tax code to reflect the digital economy. These ambitious targets are essential to future proof our economy for growth.
BTC Markets has held, and continues to hold, consultations at the highest levels with Treasury as our country looks to solidify its place as a key international cryptocurrency hub. One that will allow entrepreneurs to flourish, jobs to grow, and our education sector to expand.
The future of cryptocurrency is no longer coming—it has arrived. We are witness to the Commonwealth Bank providing crypto trading to customers, ANZ creating an Australian Stablecoin, and institutional and retail trading going from strength-to-strength. We are excited to see what the future holds for this rapidly growing sunrise industry.