Editor’s Note: First they ignored cryptocurrency, then they warned against it. Now, it looks like Australian politicians are preparing for the third act: adoration. In a keynote address to an industry conference on Monday, Jane Hume, Federal Minister for Superannuation, Financial Services and the Digital Economy, evoked the Victorian gold rush and the internet in the 90s in a glowing endorsement of the opportunities and benefits on the "new virtual frontier". Introducing plans for a new set of regulations to govern cryptocurrency exchanges she declared to the audience of crypto luminaries and banking heavyweights that "the Morrison government is backing you". Here is an abridged version of the Senator’s speech. Subheadings have been added by Firstlinks.
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…I said in my maiden speech to the Australian Senate in 2016: “In 20?years, when I look my children in the eye, I want to assure them that my generation, and I personally, have done all that we can to create a productive and prosperous Australia in which they have every opportunity to thrive and to fly.”
We want to encourage innovation in crypto assets – innovation creates jobs and growth. There are so many innovative use cases for crypto assets, many of which are not far at all away from becoming mainstream.
These include international payments, lending and borrowing, NFTs and asset tokenisation.
I know about these things because I have been there from the start. I was the original co-convenor of the parliamentary friendship group for blockchain. I will never forget the first event we organised back in 2017. The room was jam packed. It was a sign of the innovation that was to come.
[Indian-American entrepreneur and investor] Naval Ravikant says that “innovation requires decentralisation and a frontier”.
I think these two concepts are fundamentally important.
A new virtual frontier
I want to begin by talking about this idea of a frontier. Innovation, growth, productivity increases and wealth creation require something new to explore. There used to be lots of physical frontiers. Anyone educated in my home state of Victoria knows about how much the opening of physical frontiers can create opportunities for success and growth.
On 5 July 1851 – the month that Victoria formally became its own colony – gold was discovered by a Melbourne publican at Warrandyte. Within two years more than 160,000 immigrants had arrived in Melbourne from overseas to reap the benefits of the gold rush. These new arrivals sailed for up to ninety days across the world. Many had never seen the sea before. A further 110,000 arrived from other Australian ports.
These pioneers walked from Melbourne to the goldfields of Bendigo and Ballarat, carrying all their possessions on their backs.
The Government was rapacious about requiring the diggers to pay their dues, even if they had not yet found any gold. The authorities were aggressive and corrupt in their enforcement of the license requirement. Eventually, the diggers rebelled in the Eureka stockade – defending their rights and liberties against the heavy hand of the state and its brutal police force. Its spirit was against higher taxes and big government: a spirit that should be upheld in all entrepreneurial communities.
Melbourne quickly passed Sydney in population. The first telegraph poles were erected, the foundation stones of the university and public library were laid. Railway lines multiplied and crisscrossed the state.
Melbourne became one of the greatest and wealthiest cities in the world – Marvelous Melbourne. The pioneering spirit of those who arrived, took risks, worked hard, and made their fortune were the people who built Melbourne.
And it wasn’t just the people who dug the gold out of the ground who benefited. There were whole cities that grew and flourished on the back of the industry.
Importantly, not everyone made money. Although hundreds of thousands of people travelled across the world, their success was far from guaranteed. As the great Australian historian Geoffery Blainey wrote: the seemingly small decisions, like which way to turn at a crossroads – whether to head for Bendigo, Beechworth or Ballarat – “often determined whether, a year hence, he would lie beneath a fall of clay in a shallow shaft or be sailing home to England with a bag of precious gold in the strong room of the ship”.
The frontier is a risky place.
There are now very few physical frontiers – although Mr Musk and Mr Bezos with their space exploration aspirations might want to disagree with me on that.
At least for us?earthly beings, there are very few uncharted physical frontiers today.
The crypto ecosystem is a new virtual frontier.
I will not stand in the way of my fellow Australians chasing the opportunities and benefits presented by a new virtual frontier.
Crypto today is analogous to equity markets in the late 1970s prior to the boom in markets and trading technology and deregulation in the 80s; it’s similar to the internet in the late 1990s. And the decisions now are very much like the decisions then: we can either sustain the right regulatory settings to accrue the benefits of the crypto asset revolution, or we will simply miss out.
Australia’s digital asset economy could add 2.6?per?cent to GDP and create around 200,000 new jobs by 2030.
I believe that we need to keep these virtual frontiers open and leverage the pioneer spirit of this country in new and growing areas. The crypto industry, and its applications in defi, is one of the most exciting frontiers I have seen.
So my message to the room is: if you want to be a pioneer on the virtual frontier of innovation, Australia is open for business.
As the Minister for the Digital Economy, and the Minister for Financial Services, I am backing you.
Shifting the balance of power
The second point I want to dive into is decentralisation.
The internet in the 1990s was dominated by open protocols like email or HTTP. It was fair game for teenagers in their mothers’ basement. But then came the Microsofts, the Apples, the Googles, the Facebooks of the world who built on top of the open protocols and created closed systems. These systems captured market share, and rightly so – they made the internet mainstream and user friendly.
But the platforms also centralised control of the internet. This led to enormous market power centralised in the hands of a few tech giants.
Now, I’m a small L as well as a big L liberal. I’m not keen on significant market power. I prefer free and competitive markets.
Google has a 95% market share in search in Australia. Facebook and Instagram’s combined share of the online display advertising market in Australia is estimated to be 51%. They are the dominant platforms through which Australians engage with the internet.
The tech giants – the largest digital platforms – have transformed from tools that index content or enable communication, to surveillance platforms and gatekeepers of innovation.
This has led to harvesting and hoarding of consumer data. To de-platforming and censorship.
The growth of big tech has meant that software developers are prevented from using their choice of payments system, which has allowed monopoly pricing to flourish and suffocated small businesses and startups.
But most importantly, the centralisation allows tech platforms to change the rules on those who rely on them at any time. It has become much harder for startups and content creators to grow their businesses and their presence online. They do not have certainty. The rules of the game could change at any time and devastate their entire business model. This uncertainty stifles innovation.
Web3 will address these problems and provide alternatives and counterbalances to the power of big tech. It will be open, trustless and permissionless. Where users become the owners. Think Wikipedia rather than Encarta Encyclopedia.
Crypto assets are a powerful way to develop consumer owned networks. They provide a level playing field and don’t change the rules.
Platforms and apps built on Web3 will not be owned by a central gatekeeper, but rather by users, who will earn their ownership stake by helping to develop and maintain those services.
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Indeed, decentralisation and the distribution of power in general aligns strongly with Liberal values. There are parallels here.
Cryptocurrencies are not run by a central authority – they are distributed across a network of computers. Those computers make decisions and advance their own private goals in line with pre-agreed rules.
This is a lot like a free market with clearly defined laws.
Participants can have equal opportunity, they get a fair go and they know what the rules are in advance. The rules don't change without the consent of the governed.
Bitcoin has a fixed supply: 21?million coins. That can never be changed. It is basically a law of nature. And there's no more DAI in the world than MakerDAO users generate.
In a centralised system the odds are already stacked against you. In a decentralised system, they are not. You are not beholden to a central counterparty. And importantly, you don’t need the government telling you what to do or who to trust.
History has shown us that freedom, opportunity and a fair go is the best way to produce innovation. And its innovation that breeds productive economies, jobs and growth.
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I ask young people what they like about crypto and they tell me that they like the fact it is not controlled by anyone – including the Government. The small L liberal in me loves that. It gives me great hope.
You are the thought leaders and innovation pioneers in the crypto space. You know what it is about crypto that attracted you and led you here. Your priorities are our priorities.
The policy paper released today reinforces our commitment to a predictable, minimalist, consistent and simple legal environment. This will help ensure that Australian crypto businesses can have an Australian-made badge of approval. It will ensure that Australians can trust the services which they use to interact with the crypto ecosystem…
Senator the Hon Jane Hume is Minister for Superannuation, Financial Services and the Digital Economy.