The Commonwealth Bank says Australians continued to invest in cryptocurrencies during 2022’s long bear market dubbed the “crypto winter,” underlining the case for prompt regulation of the sector.
As the government consults on its plan to regulate crypto assets, CBA managing director of blockchain and digital assets Sophie Gilder said the bank’s data showed customers had an ongoing interest in the sector. That interest persisted even though crypto markets had a wild ride last year, which included the collapse of the TerraUSD stablecoin in May, and the November bankruptcy of Bahamas-based FTX.
Sophie Gilder, Commonwealth Bank managing director of blockchain and digital assets. Credit: Rhett Wyman
Given the level of retail investor interest, the banking giant is firmly supportive of moves to bring in regulation, arguing this will give consumers greater protections, while also providing greater clarity to businesses looking to invest and innovate.
Gilder said that although customers bought more crypto in 2021 than they did in 2022, the volumes were still “significant” last year.
“We believe that this sector’s crying out for regulation,” Gilder said in an interview.
“We can see that even through the crypto winter, people are continuing to buy, and we think that it’s really important that Australians who are buying crypto are entitled to the same protections as if they were buying a more established asset class.”
“We can see through CBA’s data that customers are continuing to buy more than they sell.”
“So we’re really strongly supportive of the government’s approach of looking into this area.”
The federal government has committed to regulating crypto assets and federal Treasury is currently consulting industry on how this would work in practice, as well as undertaking a “token mapping” exercise to classify the huge range of digital assets.
While some in the crypto sector have suggested the government make laws specific to digital assets, the government is committed to “technology neutrality” – a concept highlighted in past inquiries including the Wallis Inquiry of 1996 and the inquiry led by former CBA boss David Murray in 2014.
Gilder supported applying a technologically neutral approach for digital assets, which would mean analysing crypto and other digital assets and identifying those behaved similarly to financial products. She said rather than investing a whole new regulatory regime, tweaking parts of the Corporations Act was the most efficient and timely way to regulate crypto assets.
“There are many, crypto assets that exist today that do look a lot like existing financial products, they behave the same way. They’re just on a different technology,” she said.
The Australian Banking Association has also backed an approach that applies the same regulation to financial and payments services, irrespective of the underlying technology.
CBA has been the most open to cryptocurrencies among Australian banks, most of which remain wary about the regulatory and reputation risks. CBA last year paused a pilot program aimed at allowing customers to trade cryptocurrencies including bitcoin on the bank’s app.
Gilder stressed that token mapping was much broader than cryptocurrencies, and it also included the “tokenisation” of real-world assets and the development of “stablecoins.” Tokenisation is where physical assets are represented digitally on a distributed ledger – a type of database that is shared among members of a network.
“It’s got much broader implications because you can see tokenisation as the future way that we manage most assets,” she said.
Finech Australia has also said the government should focus on whether certain crypto assets are acting as financial products, but its members are split over whether Australia’s markets licensing regime is “suitable” for crypto assets.
The price of bitcoin has surged about 70 per cent this year, but CBA did not provide data on consumer demand for crypto in 2023.
Chief executive of digital asset exchange BTC Markets, Caroline Bowler, said there had been some recovery in retail investors’ interest in crypto assets, though it remained a long way off the levels reached in 2021. “They’ve not come rushing back, but we can definitely see a return of interest last seen just before the trough of the bear market,” Bowler said.
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