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Australia learns to love bitcoin

Politicians have united in urging the Reserve Bank of Australia to lend its backing to the digital currency by officially recognising it.

Could Australia’s increasingly friendly attitude towards bitcoin see the country adopt it as an official currency?

In its latest budget, announced in May this year, the government agreed that bitcoin would be treated as money in Australia instead of an intangible asset from July 1, exempting the virtual currency from goods and services tax (GST) and ending the double taxation of bitcoin trading that was previously imposed during transactions, firstly on the product being bought and then on the bitcoin itself

The move reflected a widespread perception that the Australian bitcoin market has lagged behind those of South Korea and Japan by deterring start-ups, exchanges and businesses dealing in bitcoin and other digital currencies.

Prime minister Malcom Turnbull’s administration, a coalition between the right-wing Liberals and partner the Nationals, further underlined its more relaxed stance in a statement: “Innovation will drive productivity growth in Australia. That is why the government’s $1.1bn National Innovation and Science Agenda (NISA) is designed to enable Australia to take full advantage of new economic opportunities.

“The government is committed to establishing Australia as a leading global financial technology (fintech) hub and is announcing a new package that aims to position our local fintech industry as a world leader.”

However, some politicians believe that the country needs to go further. This week the Sydney Morning Herald reported that representatives from both the coalition and the opposition Labor party have united in lobbying for the Reserve Bank of Australia (RBA) to recognise bitcoin as an official currency. They argue that the future competitiveness of Australia’s financial services sector, currently estimated to be worth A$145bn annually, depends on actively encouraging both cryptocurrencies and blockchain technology.

Cross-party initiative

The initiative is led by Liberal senator Jane Hume and Labor senator Sam Dastyari, who have formed a group, dubbed Parliamentary Friends of Blockchain, to promote their cause. Dastyari told the Herald that the digital currency has become a serious financial player and Australia risks being left behind if it does not pursue the development of its own official bitcoin and blockchain to use on the market.

“The question for Australia is are we going to follow or are we going to lead?” said Dastyari. “We need to find a bipartisan way of doing this.

“We can’t compete with our Asian neighbours when it comes to producing cheap goods and services anymore. We can compete when it comes to financial services but that is going to mean big, bold decisions.”

“This will be a revolutionary leap for the RBA and for Australian financial institutions. What we want to do here in Parliament is to create the political environment to allow that leap.”

Hume addressed an audience of 120 digital currency supporters in Parliament this week and told them that the development of a blockchain was the next major frontier in the technological revolution. “The opportunities for government, academia, and the private sector are enormous,” she added.

Nationals senator Matt Canavan is another prominent bitcoin supporter and co-author with Dastyari of a 2014 article that promoted the cause. “The emergence of bitcoins and other forms of digital currency could revolutionise money markets,” they wrote. “If competition is so good in markets for products, why shouldn’t we allow competition in markets for currency too – why should governments have a monopoly?

Two years ago, Canavan asked the Australian Competition and Consumer Commission (ACCC) to investigate whether bitcoin companies were treated unfairly after major banks closed accounts of 30 such companies. However, last year the ACCC concluded that the banks were not guilty of any wrongdoing.

The Herald also quoted the chairman of the Australian Digital Currency Commerce Association (ADDCA), Ronald Tucker, who believes that an Australian government-backed cryptocurrency would eliminate settlement times and foreign currency exchanges. “It would be an auditor’s dream because you’ll be able to see any transaction that moves on it,” he said.

Not all Australian politicians are convinced that encouraging cryptocurrencies is the way forward. The Labor party, in opposition since 2013, is opposed and in June its leader Bill Shorten made a speech that linked bitcoin with terrorism financing and called for controls on its use to be tightened.

“There are two things we simply do not know enough about to deal with properly – I refer to the use of the digital currency bitcoin and the use of the dark web, a network of untraceable online activities and hidden websites, allowing those who wish to stay in the shadows to remain hidden,” said Shorten.

He added: “We need to track and target terrorists as they seek to hide and obscure their financial dealings through electronic currencies like bitcoin.”

However, Australia’s pro-bitcoin camp may have got ammunition for its cause from the US, where last month the Commodity Futures Trading Commission (CFTC) approved institutional bitcoin derivatives trading and clearing platform LedgerX as the first federally-regulated bitcoin options exchange and clearinghouse. It looks like the days of bitcoin vs banks are numbered.

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