Crypto Giant Binance Shuts Down Singapore Trading Platform

Binance Singapore has withdrawn its application for a license to operate a cryptocurrency exchange, and will shut down its trading platform in the city-state by February 13.

Binance Singapore’s users will be informed through email as to what steps they will need to take as the platform ceases its operations. The company said in an emailed statement that registrations, crypto and currency deposits and trading on Binance Singapore’s platform will be closed with immediate effect.

“We always put our users first, so our decision to close was not taken lightly,” said Richard Teng, Chief Executive Officer of Binance Singapore. “Our immediate priority is to help our users in Singapore transition their holdings to other wallets or other third-party services.”

Binance Singapore was among roughly 170 companies that had applied to the Monetary Authority of Singapore (MAS) for a license to provide crypto services. The company had been operating under a temporary exemption during the licensing process.

The company said that its operations in the city-state will now become a blockchain innovation hub with initiatives that include incubation programs, blockchain education and investments

Last week, Binance Singapore made an investment in Hg Exchange, a regional private securities exchange. The deal gives Binance Singapore a post-money stake of 18% in a Singapore-based exchange that was granted a Recognized Market Operator license by MAS earlier this year. The deal will be subject to regulatory requirements.


Binance was founded in 2017 by Changpeng Zhao, or CZ, who built it into the world’s largest cryptocurrency exchange by trading volume, according to CoinGecko’s ranking. Although the company has no official headquarters, Binance’s main trading platform has still managed to record an average daily trading volume of $2 billion and more than 1.4 million transactions per second, according to its website. Zhao recently told Bloomberg that Binance had already decided on a location for its headquarters and will announce it soon.


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Hong Kong’s Unfriendly Crypto Rules Boost Rival Efforts To Attract Bitcoin Billionaires

Regulatory uncertainty and travel restrictions are forcing the city’s crypto elites to shift their operations to more hospitable jurisdictions. 

Sam Bankman-Fried’s time in Hong Kong was relatively brief, but incredibly lucrative. In the three years he spent in the city, the unabashed workaholic known for sleeping in his office established FTX, a crypto derivatives exchange that quickly became one of the world’s busiest trading outlets. And the success of that business turned Bankman-Fried into the richest person in crypto at the age of 29 with a $26.5 billion fortune. And then he left.

In September, Bankman-Fried jetted off to the Bahamas for good. His legions of social media followers were surprised by the unfamiliar sight of him donning a suit as FTX’s management team welcomed the country’s prime minister to their new headquarters. Why the Bahamas?

“It’s really important that we have long-term regulatory guidance and clarity,” he said from the company’s office in the Caribbean archipelago. “Hong Kong has not yet drafted the actual bill…there’s uncertainty about exactly how that is going to turn out.”

Hong Kong has developed into a hotbed for blockchain and crypto-related businesses. Many of the global elites from the crypto industry got their start in Hong Kong, including exchanges, BitMEX, Bitfinex, OSL and others. The world’s largest stablecoin, Tether, was launched from Hong Kong. And the city notched up an astounding $60 billion worth of incoming cryptocurrencies between July 2020 and June 2021, according to blockchain data firm Chainalysis.

But regulatory uncertainty in Hong Kong combined with strict quarantine requirements have become catalysts for some crypto companies to shift their operations to other markets where regulators are moving more swiftly to roll out rules that support the nascent industry. 

Singapore is the nearest such location and it managed to attract a veritable who’s who of the crypto billionaire ranks. Since the city-state opened its door to “crypto tokens” in January 2020, Brian Armstrong’s Coinbase, Changpeng Zhao’s Binance, Cameron and Tyler Winklevoss’ Gemini have already set up business units and applied for licenses to operate there.

The Monetary Authority of Singapore (MAS) said that it’s already received 170 applications for crypto-related service providers as of July. Although the financial regulator has turned down two applicants so far, three other candidates, Australia-based exchange Independent Reserve, the brokerage arm of DBS Bank and Singapore’s fintech company Fomo Pay, announced over the past three months that they had secured licenses. Coinhako also said in November that it had received in-principle approval from MAS, making it the latest to begin operating as a regulated crypto exchange in the country. So far, around 70 crypto-related service providers have been granted temporary exemptions that allow them to operate without a license for six months., the world’s third-largest spot exchange by 24-hour trading volume, according to CoinGecko, shifted its headquarters this year from Hong Kong to Singapore. Eqonex Group, a Nasdaq-listed digital asset financial services firm, established its crypto derivatives exchange last year in Singapore rather than Hong Kong, where it operates much of its other businesses. The firm, formerly known as Diginex, cited Hong Kong’s regulatory regime which bans crypto derivatives and limits trading services to professional investors.

“These were the two things that we really didn’t feel were the right way to go, and in fact were contrary to the way that we had designed our products,” said Richard Byworth, CEO of Eqonex Group. 

Hong Kong introduced an opt-in licensing regime in 2019 for platforms that allow investors to buy and sell security tokens, which are traditional stocks and bonds in a digital form. At the time, most cryptocurrencies fell outside the scope of the framework. Furthermore, licensed exchanges are only allowed to serve professional investors with a portfolio of at least HK$8 million ($1 million) in liquid assets. They are also banned from offering traders access to crypto futures and derivatives.

So far, the only firm to be granted a license under Hong Kong’s voluntary regime is crypto trading platform OSL. The Securities and Futures Commission (SFC) said in November that it has applications from several other firms under consideration. 

Now, the city’s regulators are discussing the possibility of a compulsory licensing regime for exchanges that offer virtual asset trading, including bitcoin and others that were previously excluded. The proposal, however, still suggests limiting exchanges operating in Hong Kong to only offering services to high-net-worth individuals. The restrictions on crypto derivatives are also likely to apply on licensees under the new regime. 

“Frankly, it’s not an easy set of rules to comply with. But what the Hong Kong regulations have done is deliver, in my mind, the highest level of investor protection in digital assets anywhere in the world,” said Wayne Trench, CEO of OSL. 

But others contend the policy will result in retail investors taking even greater risks if their only option is to resort to using unregulated exchanges to buy and sell cryptocurrencies in Hong Kong. “As much as you want to ban it, people will always find a way to buy crypto, and they will do it somewhere else,” said Henri Arslanian, crypto leader of PwC based in Hong Kong. “It’s just the reality of it, which puts the public more at risk ironically.”

Nearly one-third of Hong Kong’s residents are estimated to have invested in, transferred, or exchanged cryptocurrencies for goods and services, according to a newly published survey by payments giant Visa. Among developed markets, Hong Kong was ranked only behind the U.S. in terms of its residents engagement with the digital assets, the survey shows.

The SFC said last month that they are currently reviewing the rules that block retail investors from using crypto trading platforms as part of its efforts in maintaining a practical approach toward providing a “well-defined” regulatory environment.

Byworth of Eqonex said Hong Kong still has other policies in its favor that make it easier for the city’s businesses to recruit and retain international talent. “Even if Hong Kong goes down on a road of restrictive regulations around crypto and loses a lot of people to Singapore, the city can take quite a lot of market share back at any moment when it decides to change course and reverse into a more flexible regulatory regime,” he said.

It’s not just the regulatory framework that matters, but also the pandemic travel restrictions that have an impact on Hong Kong’s appeal as a place to do business. The city’s “zero infection” strategy has become a major obstacle for many of the businesses based there. Residents returning to Hong Kong face a mandatory hotel quarantine period of up to three weeks.

The Asia Securities Industry & Financial Markets Association, a lobby group representing some of the world’s biggest banks, said Hong Kong’s status as a financial center was at risk because of its “highly restrictive” quarantine policy. The group said in October that 48% of the companies polled in a recent survey were contemplating moving staff or functions away from Hong Kong due to the uncertainty over when the restrictions would be lifted. 

Meanwhile, Singapore has already opened its border to vaccinated travelers from at least 18 countries. Aside from starting to ease travel restrictions, the city-state’s proactive stance on regulation makes it more attractive as other jurisdictions move in the opposite direction. Singapore is gaining headway as some nearby countries, such as China and South Korea, clamp down on their domestic crypto industries. China recently banned all cryptocurrency transactions and mining, and South Korea shut down nearly 40 exchanges deemed unqualified in September.

Coinbase’s debut in Japan in August shed a positive light on the country, which has been at the forefront of regulating crypto assets since 2017 following the $460 million bitcoin hack on local exchange Mt. Gox. But crypto-related crimes are still a problem for Japan, where trading platform Liquid also became the victim of a cyberattack just months ago. 

To be sure, Singapore can’t rest on its laurels just yet. The government still has to decide whether the trading of crypto derivatives will be permitted. The digital instruments range from those that already exist in traditional market like futures and options, to the more innovative ones like “perpetual swaps,” a type of futures contract without an expiry date.

The Monetary Authority of Singapore said last year that it will not regulate crypto derivatives unless they are offered on approved trading platforms, and the authority warned retail investors of their risks.

The reality is that only a handful of countries have even begun to discuss crypto derivatives. “There’s no one-size-fits-all perfect crypto regulatory regime out there,” said Arslanian of PwC. “All that the crypto ecosystem wants is clarity and the ability to operate a business.”

The Bahamas is a standout in this regard because it moved quickly in December last year to lay out a comprehensive framework across both spot and derivatives trading which gave it a first-mover advantage.

According to Bankman-Fried, the restrictions on services to a local market are less important than restrictions that hinder or even block a business from offering its services to the rest of the world. “Because for most companies, this isn’t just about maximizing how much business can be done directly toward one place’s population, it’s more about where is a good home for a business generally,” he said.


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Dow Falls Over 200 Points After Highest Inflation Surge In 30 Years


Stocks fell on Wednesday, with the Dow Jones Industrial Average losing over 200 points after October’s consumer price index jumped by the highest rate in 30 years, adding to investors’ fears that high inflation could derail the recent market rally.

Key Facts

The Dow fell 0.7%, over 200 points, while the S&P 500 declined 0.8% and the tech-heavy Nasdaq Composite lost 1.7%.

The consumer price index—a key measure of inflation—rose 6.2% in October compared to a year ago, its fastest pace of increase in 30 years, according to data from the Bureau of Labor Statistics on Wednesday. 

The latest report showed that inflation isn’t slowing down: Spooked investors dumped high-flying tech stocks and sought refuge in hedges like gold and bitcoin, while Treasury yields also spiked.

Following the latest inflation data, the market is now betting that the Federal Reserve may need to raise interest rates sooner than expected, with the first rate hike expected as early as July 2022.

Shares of Big Tech stocks plunged as investors turned away from growth stocks on Wednesday: Amazon, Google-parent Alphabet and Facebook-parent Meta all fell by around 2%.

Tesla regained some of its losses this week after shares rose 4.3%, while rival electric vehicle maker Rivian saw shares surge 29% after going public at a $90 billion valuation—the biggest U.S. IPO since Facebook in 2012.

Crucial Quote:

“Inflation remains stubbornly high, to the surprise of many that expected prices to come back to earth sooner,” says Ryan Detrick, chief market strategist for LPL Financial. “The truth is you can’t shut down a $20 trillion economy and not feel some bumps as it restarts, but we are hopeful the supply chain issues will resolve over the coming quarters and inflation should calm down as well.”

What To Watch For:

“The financial markets had accepted the fact that prices would be climbing, but with every passing month inflation has only crept higher,” according to a note from Hilltop Securities on Wednesday. “Between now and year-end, demand for holiday goods will surge, while transportation-constrained supply struggles to keep up.”

Key Background:

This is the second down day in a row for stocks. Before Tuesday and Wednesday’s losses, the S&P 500 had notched eight consecutive days of gains—its best streak in over two years—and closed above 4,700 for the first time. Markets had gotten a boost from strong corporate earnings, but investors clearly remain fearful of high inflation, which will be exacerbated by labor shortages and supply chain issues through the end of the year. The Federal Reserve announced last week that it would begin reducing the historic level of stimulus it has been providing markets since the Covid-19 pandemic began. Fed chairman Jerome Powell said high inflation was “expected to be transitory.”

Further Reading:

Electric Vehicle Startup Rivian Hits $90 Billion Valuation In Biggest IPO Since Facebook (Forbes)

Stocks End Winning Streak As Investors Look Ahead To Inflation Data (Forbes)

Here’s What Investors Are Most Worried About—Including Meme Stocks And China Real Estate—According To Fed Report (Forbes)

Meat, Used Cars And Peanut Butter: Here’s What Costs More Because Of The Inflation Surge (Forbes)


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Here’s What Investors Are Most Worried About—Including Meme Stocks And China Real Estate—According To Fed Report


The Federal Reserve warned of several new risks to the U.S. financial system—including market volatility caused by meme stocks and a potential spillover from China’s real estate troubles—in its semiannual financial stability report released late on Monday.

Key Facts

Concerns over higher inflation and tighter monetary policy have risen since earlier this year and are now the top worry for investors, with roughly 70% of experts surveyed by the Fed flagging it as the main risk to financial stability.

The second most common concern—with over 50% of respondents—was over vaccine-resistant Covid-19 variants derailing the economic recovery, though that fell slightly since May, the last time the Fed published its financial stability report.

At the same time, the Federal Reserve also flagged several new types of potential risks to the financial system which merit attention and have recently emerged as top investor concerns, including the growing interest in “so-called meme stocks.”

A large group of younger retail investors, spurred by zero-cost brokerages and discussion on social media, have been investing heavily in meme stocks and cryptocurrencies, a trend which can cause stock market volatility in the future, the Fed pointed out. 

Another big risk—now the third-highest concern for investors according to the Fed—is China’s regulatory crackdown, and especially the troubles in its real estate sector, which could cause a “spillover” into U.S. markets. 

Property development giant China Evergrande has been attempting to avoid defaulting on its debt since this summer, causing wider damage to Chinese real estate stocks and raising investor concerns about the world’s second-largest economy.


“Fiscal and monetary policy accommodation, along with continued progress on vaccinations, continued to support a strong economic recovery,” the report said. “Despite the tragic human toll, the Delta variant has left a limited imprint on U.S. financial markets.”

Crucial Quote:

“Social media can contribute to an echo chamber in which retail investors find themselves communicating most frequently with others with similar interests and views, thereby enforcing their views, even if these views are speculative or biased,” the Federal Reserve warned about meme stocks in its latest report. While wild surges in stocks like GameStop and AMC have had a “limited” impact on financial stability so far, this area of the market should be “monitored” further, the report stated.

Key Background:

“Since the previous survey results published in May, concerns related to inflation, new COVID variants, and elevated risk-asset valuations have remained top of mind, while several new risks have surfaced, including possible fallout from Chinese regulatory changes,” the central bank said in its report. The Fed’s previous financial stability reports have mentioned China before, warning that its high debt levels and “stretched real estate prices” could adversely affect the U.S. economy.

Further Reading:

These Stocks Are Surging After House Passes $1 Trillion Infrastructure Bill (Forbes)

Stocks Hit Fresh Records After Fed Says It Will Taper Pandemic Stimulus (Forbes)

Federal Reserve Scales Back Pandemic Stimulus, Will End By June (Forbes)


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S&P 500 Falls From Record Highs But Remains On Track For Its Best Month Since 2020


The stock market pulled back from record highs and fell on Wednesday as the rally driven by third-quarter earnings began to lose steam, although the S&P 500 remains on track for its best month since November 2020.

Key Facts

The Dow Jones Industrial Average and S&P 500 declined by 0.7% and 0.5%, respectively, on Wednesday, while the tech-heavy Nasdaq Composite was flat.

The Dow and S&P 500 both fell for the first time in at least three days, despite a recent earnings-driven rally that has boosted the market to new record highs. 

The S&P 500 remains on track for its best month since November 2020, rising by more than 5% so far in October, while the Dow is up around 4%. 

Third-quarter earnings have so far proved more resilient than expected, despite concerns about inflationary pressures, supply chain disruptions and labor shortages: Just over a third of S&P 500 companies have reported results so far, with 83% of them topping estimates, according to Refinitiv. 

Big tech stocks like Microsoft and Google-parent Alphabet rose by more than 4% after both companies topped earnings estimates on Tuesday, while shares of Visa fell nearly 7% after issuing a conservative revenue outlook. 

Shares of popular stock trading app Robinhood, meanwhile, fell more than 10% on Wednesday after reporting earnings that substantially missed expectations because of a sharp drop in crypto trading.

Crucial Quote:

Today was actually “one of the most tumultuous, brutal, and frustrating sessions in a long time,” as most sectors suffered losses—with the biggest declines coming from financials and energy stocks, says Vital Knowledge founder Adam Crisafulli. “The overall market was very soft in the U.S., although this was somewhat masked by huge post-earnings rallies in Google and Microsoft.” The market sank late in the session, he points out, after Democrats suffered another setback in their efforts to reach a deal on the government spending bill.


As Democrats continue to iron out the details of their massive social spending plan—and how to pay for it, a newly proposed billionaire wealth tax was immediately shot down on Wednesday. Moderate Sen. Joe Manchin (D-W.V.), whose support is crucial for Democrats to pass legislation in the evenly split Senate, voiced concerns—effectively killing the proposal mere hours after its release.

What To Watch For:

“The Nasdaq continues to outperform following robust mega-cap tech results and as Democrats struggle to find ways to increase taxes—Kryptonite for big-tech has always been raising taxes and regulation,” says Oanda senior market analyst Edward Maya. “With Senator Joe Manchin showing little openness for tax increases, tech stocks are soaring.”

Further Reading:

Robinhood Shares Plunge After A Decline In Crypto Trading Hits Earnings (Forbes)

Twitter Shares Jump After Apple’s Privacy Changes Have Minimal Impact On Quarterly Earnings (Forbes)

Billionaire Tax Dead On Arrival After Manchin Blasts Proposal Mere Hours After Its Release (Forbes)

Stocks Close At Record Highs After Tesla Hits $1 Trillion In Market Value (Forbes)


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Australian Senators pushing for country to become the next crypto hub

On Oct. 20, the Australian Senate Committee delivered a groundbreaking report calling for a complete overhaul of crypto legislation and licensing in the country. But, will it achieve its aim of transforming Australia into an international blockchain hub and providing a model for other countries to follow? 

Top-down governmental responses to innovation have always been questioned by entrepreneurs. Right now in crypto land as institutional investment flows steadily in and decentralized finance (DeFi) use cases and products have continued to flourish over the past 18 months, many crypto companies are begging for further regulatory clarity.

The original Australian Senate Select Committee on FinTech and RegTech, chaired by Senator Andrew Bragg, was established in 2019 to strengthen the regulatory environment for fintechs and regtechs in Australia. It would quickly become known as the Bragg Inquiry and is now largely focused on crypto. Generally not regarded for its regulatory progress, Australia’s quick pivot to researching and proposing helpful rules for the crypto industry has surprised many.

Judging by the report’s heavy quoting of stakeholders, the Australian government’s October 2021 Senate inquiry final report into digital assets has attempted to truly listen to the vast concerns and aspirations of the bustling Australian crypto industry, with almost 18% of Australia’s population owning crypto. The inquiry released its final report after six months of hearings and submissions on the topic. This timely report has received widespread industry applause.

Generating a response

Notable recommendations include proposals for tax reform and a possible new corporate entity to be able to register decentralized autonomous organizations (DAOs) in Australia. The recommendations present an opportunity to attract jobs, investment and innovation to Australia and to retain talent.

The outcome is perhaps not surprising, given that Bragg is making his mark as a “Crypto Bro.” He participated in a July “Ask Me Anything” session on Reddit and met with crypto stakeholders. He conducted another in September, where he proclaimed:

“I am very keen on the democratic mandate of crypto — I think it has created an asset class that anyone can access.”

He seems to understand the space well, as the final report suggests Australia create DAOs as a new legal corporate vehicle. An acknowledgment that is trying not to subsume these new technologies into existing legal frameworks is contrary to Australia’s common law legal system built on precedent and legislation. On Reddit, Bragg had tipped his hat to progressive legislation in the United States state of Wyoming: “The point here is regulatory arbitrage. We want the innovation to be legitimised through a non-stifling regulatory approach. Do you think the Wyoming DAOs are a good idea?”

So, has crypto gotten too big for the government to ignore? The report suggests the committee, composed of six members from the major political parties and an independent senator, and not just Bragg, is willing to explore new ideas and genuinely support Australia’s place as a home for crypto innovation.

The summation of the report is that Australia might legislate an encouraging regulatory regime for ambitious concepts such as DAOs and that crypto custodial services can now be conducted in Australia. Does this provide an example for less crypto-friendly countries to follow? After all, Australia has been long known for dangerous wildlife and, rarely if ever, for innovative regulation.

It could be argued that with this move, Australia is looking to position itself as a location with favorable laws, hoping to attract more business. “Jurisdictions that provide competitive policy for decentralized technology will attract talent and investment in this space,” noted Kelsie Nabben, a Blockchain Australia board member and Cointelegraph contributor. Wyoming made DAOs a corporate entity a year ago and is now celebrated in crypto circles globally.

The industry welcomed the report but there are concerns that few in the government understand the industry well enough to adequately debate and pass the legislation. Chloe White, CEO of Genesis Block, is well known in crypto circles, having been the Australian government’s former “ambassador for blockchain.” She told Cointelegraph that the government will need to ramp up its efforts in order to follow through on execution:

“The reforms proposed by the Senate mark a turning point. However, the government will struggle to meet the Senate’s ambitious deadline — of 12 months to legislation — if it does not liaise closely with industry experts to earn a more thorough understanding of digital assets.”

The final report — if implemented — would offer much regulatory clarity for the crypto industry. Here are some of the key recommendations that were included:

DAOs a company law vehicle

Investor Telegram groups have paid considerable attention to the Australian inquiry. Notably, investors are greatly excited by the recommendation for the government to establish a new DAO company structure into corporate law. Legal personality for DAOs and limited liability for members would open the floodgates of innovation.

This Senate’s final report itself noted: “Legal liability for members (i.e. token holders) for these organisations is currently unclear, and this regulatory uncertainty is preventing the establishment of projects of significant scale in Australia.” In other words, institutional investment could now flow to major DAO-based projects.

“This is a big one. If legislated, these will be the most significant reform to corporate law in two decades,” RMIT Blockchain Innovation Hub researcher Aaron Lane noted in a press release, adding: “Providing DAO members with the option of a limited liability company structure will encourage talent and investment in Australia.”

Stop de-banking of crypto exchanges

The committee first recommended establishing a new market licensing regime for crypto exchanges since the major Australian banks have long been accused by Australian regulators and the Senate Inquiry of the anti-competitive removal of remittance payments for crypto exchanges or “de-banking,” despite being registered with the financial services watchdog Australian Transaction Reports and Analysis Centre, or AUSTRAC. Large centralized crypto exchanges such as Independent Reserve supported the idea in their Senate submissions to the inquiry.

Further, the proposal recommended establishing “bespoke” custody or depository regime for crypto assets. Crypto asset custody under the remit of Australian regulators would act as a risk minimizer for local investors and encourage custodial businesses to be set up in Australia.

A “token mapping” exercise aimed at appropriately characterizing different crypto assets and determining if they are considered financial products that require some crypto exchanges to register for an Australian Financial Services License (AFSL) is also proposed. This would be welcomed by many, particularly those seeking institutional investment. Australia is also particularly well-known for long established custody rules from a highly professional superannuation industry as a reference point.

One key change is to institute a new recourse for under-banked customers, which would allow customers to appeal to the banks’ decisions. Common access could also be granted to the New Payments Platform, an industry-wide payments platform for Australia, national infrastructure for fast, flexible and data rich payments in Australia controlled by a group of major banks.

This move would reduce the reliance on payments systems on the major banks since the crypto exchange industry in Australia is believed to be built on a house of cards without direct banking. Many crypto exchanges rely on two to three fintechs to bank with the Australian banking system. If those fintechs were de-banked, then the crypto exchange industry is plausibly at risk of collapse in Australia.

Rejecting the Financial Action Task Force’s (FATF) Travel Rule.

Furthermore, the inquiry rejected the Financial Action Task Force’s (FATF) “Travel Rule.” FATF is the international body that sets standards for Anti-Money Laundering. The Travel Rule means that in transactions involving virtual assets, ordering institutions must obtain and hold Know Your Customer (KYC) information for both the sender and the receiver. FATF currently has an extremely broad working definition regarding virtual assets and Virtual Asset Service Providers (VASPs).

The key point is that FATF considers VASPs very broadly when it comes to the purposes of the Travel Rule. Decentralized exchanges (DEXs), certain decentralized application (DApp) owners and operators, crypto escrow services and certain nonfungible tokens (NFTs) are all considered VASPs. This, is of course, unworkable for DeFi projects which are open access to anyone with a crypto wallet and do not require verification.

If crypto exchanges were overregulated under the wide FATF Travel Rule approach, this would likely stop Australia from becoming a hub of DeFi innovation. The Travel Rule is far too expansive in its description of VASPs, making enforcement very difficult for products such as high-frequency automated trading.

While this would hinder experimentation in the crypto industry, it would also send some decentralized exchanges and protocols permanently underground, as they would seek to avoid any compliance. To date, no government seems to want to enforce the Travel Rule. Perhaps everyone is waiting for the U.S. to lead on the issue.

Clearing up the DeFi tax nightmare

The evolution of DeFi has made the tax treatment of cryptocurrencies increasingly problematic for the industry. While Bitcoin (BTC) and Ethereum (ETH) are currently considered capital gains tax assets and eligible for capital gains tax upon the sale, DeFi’s liquid speed presents a new problem for tax considerations. Examples include minting and staking, along with the tax status of crypto to crypto exchanges, liquidity provider tokens and wrapped coins, which remain unclear for tax purposes.

The Bragg Inquiry recommended that capital gains tax should only be applied “when there is a clearly definable capital gain or loss” when a trade occurs. However, the threshold for triggering taxation has yet to be declared.

Also, a 10% tax discount was proposed for businesses that sourced their own renewable energy to mine cryptocurrencies and could serve as a nice touch to attract talent to Australia.

Mostly positive response?

Many were surprised by the support from Australia’s crypto industry. CEO at BTC Markets, Caroline Bowler, praised the recommendations saying Senator Bragg’s report not only meets our expectations of a proportionate, responsive policy change but also surpasses it in many ways: “For an industry that is moving at such a rapid pace, these pragmatic recommendations are going to give a massive leg up in putting Australia on the global fintech map.”

Tim Lea, a crypto policy activist in Sydney and the CEO of fractional funding platform, Fractonium, told Cointelegraph:

“The report is supremely intensive. If the key recommendations are taken up, it has the potential to position Australia so strongly in the global markets as a jurisdiction with a workable regulatory framework that provides Australian innovators with the clarity, certainty and flexibility to aggressively seize global market share.”

The order of the recommendations is notable and suggests that the government understood which policy levers to pull first.

Fred Pucci, a long time crypto advocate and investor, told Cointelegraph that the report reads “a bit like playing music. It makes artistic choices at every step.” DeFi, which is hard to regulate if at all, was not explicitly mentioned in recommendation one, which concerns the establishment of a market licensing regime for digital currency exchanges.

In recommendation two, custody is advised as important for investor protections but, again, no mention of DeFi or “upstairs markets,” an old term in equity for off-market trades being permitted but less transparent.

Meanwhile, “DAOs are the future and a key part of DeFi and this says that Australia wants to create a legal environment for experimentation in Recommendation 4” states Pucci. It is interesting that DAOs are considered to be ahead of the Anti-Money Laundering reform recommendations. In short, crypto exchanges are supported front-and-center first in the recommendations, but the regulation is not over-reaching. This reflects the policy messaging throughout the 143 page report.

Devil in the details

The report is mostly aspirational for now, but some regulatory patience may play in Australia’s favor. This area could be finalized as these proposed laws settle in the future, giving Australia time to follow other jurisdictions. The token mapping delay is sensible because tokens and assets are hard to define, as every country now knows.

Related: Crypto breaks Wall Street’s ETF barrier: A watershed moment or stopgap?

Senator Bragg said he believed the recommendations struck the right balance between encouraging innovation and protecting consumers, and that he wanted the proposals legislated within 12 months.

He also suggested that his aim was to challenge other crypto-friendly jurisdictions, Singapore, the United Kingdom and the United States. “What we’ve tried to do is not use old hooks for new coats. This is a detailed report with an agenda for Australian leadership in digital assets,” he said:

“We want to be an economy which is dynamic, we don’t want to be captured by the old vested interests of yesteryear.”

Some are still reticent, recalling Australia’s regulatory track record for innovation. “This is an 8.5/10” said Pucci, “but it’s probably not going to get much better than this at the implementation stage. It still has to go through the Treasury and the rest of the political system.”