The G20 nations, including Australia, need to take the lead when it comes to producing a regulatory framework for bitcoin that recognises it is unlike anything the world has seen before, according to the US Chamber of Digital Commerce president Perianne Boring.
Boring was one of a number of experts giving evidence before an Australian Senate inquiry into digital currency on Wednesday.
She told the inquiry it’s important to follow a path similar to the way in which government treated the internet in its infancy: allow bitcoin to grow and flourish before racing to regulate it. She admits that striking a balance between regulation that protects interested parties and doesn’t stifle innovation is tricky.
“The best way to do that is to provide regulatory clarity in existing laws,” she says.
“I would go through and clarify which types apply to these (digital currency) tech companies and which ones don’t.
“This is about strengthening the existing finance system. Nobody is trying to replace existing government currencies.”
Others giving evidence to the inquiry included Ron Tucker from the Australian Digital Commerce Association, entrepreneur Mark Pesce, Clayton Utz partner Andrew Sommer and the founder of Australian bitcoin startup ABA Technology, Chris Guzowski.
Inquiry chair Senator Sam Dastyari told the witnesses the government was looking for the best way to maximise the potential opportunities that bitcoin represents to the economy, but at the same time ensuring it doesn’t expose the country to “potential downfalls” or actions that could stifle the Australian bitcoin industry.
“The lack of a regulatory framework or regulatory oversight is one of the key drivers for lack of investment in this space,” Guzowski told the inquiry.
Senator Bill Heffernan told the panel of experts the Australian bitcoin industry should return to discussions with government on regulation when it can classify the digital currency as being a bag of wheat or a bag of coins.
The question Heffernan ultimately wants answered is whether or not bitcoin is property or currency. Earlier this year the Australian Tax Office gave guidance that bitcoin would be treated as property and as such GST would be applied. Heffernan was particularly concerned with how this might relate to corporate tax avoidance and “the redefinition of sovereignty”.
Both Pesce and Boring pointed out that in the United States, various government bodies had taken different views on that question, based on common sense regulation about how bitcoin is predominantly used, rather than global “harmonisation” that Heffernan was after.
All of the witnesses spoke of the inevitability of digital currencies becoming mainstream in the future, regardless of whether or not such harmonisation occurs.
“Within a decade, every networked device will have some version of blockchain technology running inside it, serving as the first line of defence against network attacks, providing badly needed security and authentication capabilities,” Pesce says.
“Blockchain technology will be everywhere, in everything, so pervasive it becomes invisible. Digital Currencies such as bitcoin are at the start of a transformation that will leave our world more open and more secure.”
Sommer built on that point of openness, describing bitcoin blockchain’s public ledger as an auditor’s dream.
“As a regulator, the amount of information that is available through the documentation of transactions on the blockchain is unprecedented,” he says.
“The blockchain can distinguish between a transaction that’s supply for a GST purpose, and a supply that’s GST free.”
He said it could be an additional tool to improve transparency in the finance industry.