Australian Senate: blockchain will have a profound impact on the economy

By John Bassilios and Sarah Khan

Blockchain technology will drive growth in both Fintech and Regtech, an interim report by the Australian Senate predicts.

The Senate’s Select Committee on Financial Technology and Regulatory Technology (Committee) affirmed the potential for the country’s ambitious National Blockchain Roadmap released in February 2020. It cited an expectation that blockchain technology will generate $175 billion in global trade value by 2025 and more than $3 trillion dollars by 2030.

The Committee also noted the opportunities for blockchain to add economic value to a range of business sectors, which not only include the leading industries of financial and insurance services, followed by professional, scientific and technical services and retail trade, but other sectors such as healthcare and social assistance, agriculture and real estate services.

The interim report details several recommendations regarding blockchain technology, summarised below.

Property and blockchain

The interim report highlights the potential for blockchain in the property sector, including property investment, blockchain as a reporting tool and management of property data.

The Committee noted the value in the property sector working with the states and territories to investigate the development of a blockchain-based set of government property data and referred to a report exploring the potential of using blockchain technology to ‘encode, confirm, and transfer almost all forms of property.’^[1]

Initial Coin Offerings

The interim report also notes the need for regulatory change regarding Initial Coin Offerings (ICOs).

The importance of access to capital for blockchain firms was emphasised to the Committee. In the context of raising capital, the tax treatment of ICOs was raised, in particular, that the issuance of an ICO is currently taxed as income.

Power Ledger highlighted that 'for blockchain-enabled startups, an important means of achieving this can be through an ICO whereby tokens that perform a certain utility can be sold to the market, as an alternative to traditional forms of capital raising'. It was suggested to the Committee that Australia's tax laws have not contemplated this new way of capital raising with the issuance of an ICO currently taxed as income.

Blockchain Australia and RMIT Blockchain Innovation Hub have released a report titled Australia's Blockchain Future: Recommendations for the Taxation of Initial Coin Offerings. The report highlighted that 'other countries have remedied or are in the process of changing their tax laws to encourage their blockchain sector.’^[2]

The Committee noted that the Treasury conducted a consultation process into ICOs with an issues paper released in January 2019 and recommended that the Australian Government release the final Treasury report on ICOs when it is completed.

Blockchain in Australia

Blockchain will continue to deliver significant productivity, security and efficiency gains for the Australian economy. The Committee’s interim report emphasises the need for Australia to capitalise on opportunities and address challenges to foster the growth of blockchain technology across a range of sectors.

You can read our article summarising the Committee’s 32 recommendations here.

The Committee’s final report is due in April 2021.

[1] Australian Taxpayers Alliance, Submission 102, Attachment 3, Professor Jason Potts and Dr Trent MacDonald, Who should Regulate Bitcoin? Challenges and opportunities for blockchain technology in Australia, p. 10.

[2] Power Ledger, Supplementary Submission 1.1, p. [1].