Labor must be cautious about ‘token mapping’ crypto

A respected blockchain expert has warned proposed moves by the Federal Government to regulate the crypto assets sector could increase barriers to entry for retail investors.

Perth-based Ian Love, who launched Australia’s first crypto asset fund in 2017, told The West Australian that he was concerned increasing regulation would exacerbate wealth inequality across the nation.

“At the moment, there are no real barriers to entry. That in itself leads to increased financial inclusion,” Mr Love said.

It comes after the Albanese Government announced on Monday that Australia would become the first country in the world to “token map” the crypto assets sector.

Treasurer Jim Chalmers said token mapping — the process of determining the characteristics of all digital tokens available — would help the Government identify how crypto assets and related services should be regulated.

The token mapping would help identify gaps in regulatory framework, review innovative organisational structures, and look at custody obligations for third party custodians of crypto assets.

Labor will start consulting with stakeholders on a framework for industry and regulators, which would allow consumers to participate in the market while also better protecting them.

Dr Chalmers said the Government needed to ensure consumers dabbling in crypto were adequately protected, given the widespread nature of crypto advertisements.

Mr Love said it was crucial the Government struck the right balance between protecting consumers without excluding retail investors.

“The current consumer protection model is very much about protection by exclusion, and retail investors are excluded from a whole host of investment opportunities,” he said.

“The Government needs to understand that crypto is breaking down that barrier.”

Jamie Reed, founder of JR Crypto Consulting, said it would be beneficial for the Government to determine how cryptocurrencies should be taxed.

Mr Reed noted that there were many “grey areas” when it came to taxing cryptocurrency, with a major problem being many consumers thinking crypto assets were tax-free.

“Because people think it’s tax-free, they might invest a lot more money than they would in shares,” he said.

“Once the Government does understand crypto, it will be easier for them to provide education to people.”

Prem Aghera, co-founder of cryptocurrency platform MoonPaw, said he hoped the Government token mapping the sector would help legitimise businesses operating in the space.

“It would help companies that are doing the right thing within the rules and distinguish them from scams,” he said.

It was essential that the Government focused on increasing financial literacy around cryptocurrency, Mr Love highlighted.

He acknowledged there also needed to be increased engagement between agencies and consumers, to ensure crypto-related scams could be more easily reported.

A public consultation paper on token mapping of the crypto asset sector is to be released soon.