Australia might like to talk a big game about being ready to embrace the future of finance. Are we truly unlocking the promise of crypto innovation? Or are we just paving a regulatory dead-end, with bureaucratic delay and lost potential? The bipartisan deal on crypto regulation seems perfect in theory, a bipartisan accord vowing guidance and consumer safety. I'm not convinced. In fact, I'm worried.

Are We Over-Regulating Before Thinking?

Of course, nobody wants another FTX debacle. Consumer protection is paramount. The government's current trajectory, particularly the ALP's cautious, almost glacial pace, smells less like responsible governance and more like regulatory overkill. Otherwise, we run the risk of suffocating the thing we say we want to grow.

Think of it like this: imagine trying to teach a child to ride a bike by strapping them into a full-body cast. Sure, you've eliminated the risk of scrapes and bruises, but you've eliminated any chance of them actually learning to ride. That's the danger we face. In pursuing an era of zero risk – which is an impossible target to achieve – we become so risk averse that we overlook the upside opportunities.

The ALP’s promise to continue this tortuous process until 2025 is weighing us down. We think constant exposure drafts and endless feedback loops are, frankly, way too slow. We know that the crypto landscape is changing at warp speed. By the time lawmakers are ready to act, we’ll already be past that point in technology advancement. This quick progress will make their regulations moot. Otherwise, we’ll be regulating the past and not shaping the future.

Will Incumbents Hijack The Rules?

Here's another fear: regulatory capture. But it’s a dirty little secret across most industries, including crypto. Yet the larger, more incumbent players have the great resources and thus the greater lobbying and regulatory capture power to significantly bias regulations in their favor. This can result in regulations that actually shut out smaller, more nimble startups—stifling competition and killing progress.

Imagine the big banks, now suddenly interested in crypto after years of dismissing it, whispering in the ears of regulators. Which one do you imagine they’ll be lobbying for—a truly level playing field, or rules that continue to entrench their dominance?

If the government's only regulatory tool is heavy-handed intervention, then every crypto project, from the most innovative DeFi protocol to the simplest payment app, will be treated the same way.

Talent Drain Threatens Crypto Future

And what about the talent? Australia is home to some of the brightest minds in crypto. If we don’t take action and create a regulatory environment that’s hostile to innovation, those minds will just move to other places. They’ll pack their bags and move to countries such as Singapore or Switzerland, where the regulatory environment is far friendlier.

  • Singapore: Known for its progressive stance and regulatory clarity.
  • Switzerland: A hub for crypto innovation with a supportive legal framework.
  • Portugal: Offers a tax-friendly environment for crypto investors.

Then what? In the alternative, we’ll be stuck with a hollowed-out industry, having to import talent and technology from other countries. Otherwise, we’ll be mere consumers of innovation, not creators. Is that really the future we want?

The Libertarian Party is calling for a national Bitcoin reserve. Though this concept might feel like an impossible dream to some, it highlights the time and place that calls for a bolder vision. We have to be imaginative, to look beyond regulation as usual, to more flexible regulatory frameworks that encourage responsible innovation and still protect consumers.

How about regulatory sandboxes, where startups can test new technologies in a controlled environment. Or regulatory carve outs for startups so they’re given space to innovate and scale before being subjected to heavy-handed enforcement? Or better yet, some form of industry-led self-regulation, with explicit rules and mechanisms for accountability?

For now, crypto’s fate in Australia remains uncertain. We have a choice to make. What we don’t want to do is stifle the massive potential of this technology and jeopardize our shot at a vibrant, competitive ecosystem. Or we can allow regulatory gridlock to choke off innovation, pushing talent out of the nation and ceding our leadership to others.

The choice, as they say, is ours. Let's hope we make the right one. For if we don’t, we’ll have no one but ourselves to blame when the crypto revolution leaves us behind.