Lawyers and bitcoin groups in Australia are joining those in other countries in calling for greater clarity on bitcoin regulation, allowing clearer direction for both businesses and consumers on how to conduct their affairs in a digital currency economy.
Bitcoin now backs a business ecosystem into which hundreds of millions of investment dollars are pouring. No longer just a hobby for programmers and political activists, the fledgling industry is in need of more established structures to support those investments.
There is a growing argument for such structures: lawyers in Poland this week called for more consumer protection surrounding bitcoin, saying a lack of regulation denied users the rights available to those using more traditional payment methods. Furthermore, the industry is currently debating the pros and cons of New York's just-released 'BitLicenses' structure for compliance.
Then there's the continuing problem of existing banks and others in the finance industry refusing to work with bitcoin-accepting businesses, unilaterally closing accounts or publicly denying agreements.
Advocacy group meets with officials
Ronald Tucker, chairman delegate of the new business-oriented Australian Digital Currency Commerce Association (ADCCA) and CEO of exchange Bit Trade Australia, last week held an awareness-raising seminar in the capital Canberra with bitcoin business representatives and government stakeholders.
These included officials from the Australian Taxation Office (ATO), the Australian Securities and Investments Commission (ASIC), Treasury, the Reserve Bank of Australia, plus a number of other government departments and law enforcement bodies.
Tucker told CoinDesk:
"We believe an effective regulatory framework promotes innovation and protects consumers."
He said the meeting was well received, despite some obvious concerns, that officials knew what was at stake with the new technology and were taking it quite seriously, adding:
"This is a truly accessible global marketplace that's developing here. The best thing to do is to work with other industry bodies around the world to help inform and educate and make sure we're doing things in everybody's best interests."
The proposal ADCCA pitched was that the industry self-regulate, with government providing a liaison to assist it in doing so. That would help create a robust financial services framework around the digital economy.
Australia already had a world leading financial services legislative framework in place, he added, and could really establish itself as a leader in the digital space.
Tucker said ADCCA was watching developments in Japan, where the government has been instrumental in forming the self-regulatory body Japan Association of Digital Asset (JADA). There also have been positive moves in the UK, US and Singapore.
Call for clear, sensible policy
Amor Sexton of Adroit Lawyers in Sydney is Australia’s first 'digital currency lawyer'. In addition to providing advice to bitcoin businesses, she has been actively involved in liaising with the government and the regulators on behalf of the industry.
Together with fellow lawyer Reuben Bramanathan of McCullough Robertson, she researched and authored a white paper in June on bitcoin taxation recommendations for the Bitcoin Association of Australia (BAA).
Sexton said a level of regulation is necessary to foster trust from consumers and other market players, to increase adoption of bitcoin. Warnings from organizations like the European Banking Authority mainly concerned consumer protections and preventing money laundering – risks Sexton said could be largely mitigated by regulating businesses that interact with consumers.
She told CoinDesk:
"There is a definite need for the various sections of government to provide guidance on the regulatory framework that applies to digital currencies in Australia. However, what is more important is that the guidance they provide is appropriate and well considered."
Not too fast
Balance is the key, Sexton said. Regulation needs to mitigate risks without creating a compliance burden that stifles innovation, and the government must consider the benefits of a robust digital currency industry.
The benefits to places like Australia would be increased innovation, competition, and efficiency in the financial services sector. For an isolated country like Australia, bitcoin's lower fees would also open new world markets to small and medium sized businesses.
She added that even though there was a need for more clarity on the issue, governments should still take the time to familiarize themselves with the technology first, understand its uses and consider wider policy implications.
"The more consideration that goes into these issues, the more thought goes into achieving that important balance between regulation and innovation."
Sexton is one lawyer leading the way in providing advice to companies regarding digital currency use and assisting the government in formulating policy. She has also organized a 'Bitcoin for Accountants' seminar in Sydney to familiarize accountants with bitcoin transactions and some of the surrounding accounting issues.
Need for bank support
Bramanathan also stressed the need for patience, urging a "sensible approach". This would allow banks and financial institutions to support bitcoin, he said, which would be a "huge step for bitcoin businesses and users".
He also told CoinDesk there should be an opportunity for self-regulation, agreeing with ADCCA's Tucker.
Australia's two key bitcoin organizations are the BAA (affiliated with the Bitcoin Foundation) and ADCCA, which is also open to non-bitcoin businesses in the existing financial sector. Like ADCCA, the Association is in ongoing consultation with government departments and regulatory bodies.
Bramanathan is an expert on digital currency and tax. He has also published an article about Australian superannuation (private retirement funds) and bitcoin, and other articles arguing why bitcoin should be legally defined as money under tax law.