Amidst all of the negative press of late related to crypto Initial Coin Offerings (ICOs), the Australian Government’s Treasury department has recently released an issues paper that draws attention to the many advantages and opportunities that ICOs can bring to businesses and to the Australian economy as a whole. The 27-page paper does not ignore the failure and fraud aspects of the latest twist on fundraising within the crypto ecosphere, but it does stress the opportunity to attract “an emerging technology that is transforming the way businesses work around the world.”
There has been much press about the so-called “arms race” between financial centers across the globe, each one vying for the favor of executives within the cryptocurrency and blockchain technology sector. The Republic of Malta, for example, has adopted user-friendly legislation for crypto related businesses, and the strategy appears to be working. A number of large crypto exchanges have set up shop on the island, and Malta has become the “crypto-hub of the world”. Maltese exchanges now process more than second-place Hong Kong and twice as much as fifth-place runner up, the United States.
The ongoing competition, however, is getting crowded. In addition to Malta, other major contenders include Bermuda, Gibraltar, the Seychelles, Switzerland, Puerto Rico, and Liechtenstein. The Marshall Islands and the State of Wyoming in the U.S. have also recently joined the fray. By the looks of Australia’s position paper, its Treasury department is suggesting that the country focus on blockchain technology and the developments in that arena that typically use an ICO, including specialized tokens, to raise initial startup capital.
The recommendation is that Australia becomes an “ICO hub”. Per the report:
There is widespread anecdotal evidence to suggest that the organisers of ICOs are choosing to issue from jurisdictions where regulatory settings are seen as most accommodating. A number of jurisdictions are actively competing to attract ICO activity and establish themselves as a hub for innovative technology companies that favour ICO fundraising. (We need to look at) whether our regulatory framework is well placed to allow those opportunities to be harnessed whilst appropriately managing the associated risks; and, whether there are other actions that could be taken to best position Australia to capitalise on new opportunities.
The paper does present a risk section that acknowledges the problems that continually receive negative press. Many ICO funded businesses have failed and quite a few have been outright frauds or strayed far from accepted disclosure and registration standards expected when raising capital from the general public. As a result, investors have lost billions of dollars and will be much more discriminating going forward. The paper says:
The resulting ‘wild west’ notoriety of the ICO industry has challenged the reputation of some legitimate businesses, and even technologies, related to ICOs.
The Treasury group believes these challenges can be overcome and that the benefits far outweigh the downside risks. For the benefit of the Australian economy, ICOs should not be ignored. The country is already developing a massive technology and innovation hub in Adelaide, the coastal capital of Southern Australia, and a “blockchain hive” could easily become part of this overall plan.
In several other developed countries, there could be resistance at the top, but in Australia’s case, Prime Minister Scott Morrison is an advocate of the disruptive power of blockchain technology. He has said:
Distributed ledger technologies and Blockchain, working in the financial sector, that’s going to open up massive opportunities.
The Treasury department is now soliciting comments from the general public on these prospective policy decisions.