In Australia, things might be looking up for the bitcoin community. A group of local bitcoiners is working to form a local chapter of the Bitcoin Foundation, and there is a new trading platform for the community.
Around two weeks ago, a new exchange based in Sydney called BTC Markets went live. The exchange, which supports bitcoin and litecoin, was started by Martin Bajalan, a bitcoin enthusiast who is among a team of nine working to set up an Australian chapter of the Bitcoin Foundation.
The exchange provides trades in real time, and charges no fees for fund transfers, making its money instead from a trade commission that starts at 1%. His goal is to conduct a million trades per month by the end of next year.
“The challenge will be how quickly we can provide adequate liquidity with new financial products to attract traders, and also overcome the regulation issues over the next few months,” says Bajalan.
What regulatory issues might those be? Australia has several regulators governing financial markets. The Australian Securities and Investments Commission (ASIC) regulates financial markets overall, while specific KYC/AML practices are overseen by Austrac.
Financial services businesses in Australia are required to obtain an Australian Financial Services License (AFSL) from ASIC, but Bajalan doesn’t believe he needs one.
Right now, the regulatory landscape looks relatively stable. “We have had confirmation from our lawyers that as long as we perform real-time settlements, there is no need for a license,” he says.
His lawyer advised him that bitcoin does not fall into category of a financial product (specifically a contract to exchange one currency for another which is settled immediately) under the Corporations Act s.765A(m).
“If trades did not settle immediately, then bitcoin trading would probably be either making foreign exchange contracts or trading in derivatives, both of which require an AFSL,” he adds.
Bajalan has contacted Austrac, and says that he has been told that bitcoin isn’t covered by the Anti-Money Laundering/Counter-Terrorism Financing Act that dictates AML rules. This is because bitcoin isn’t backed by precious metal, he says.
Regulators are tricky institutions, though. Rules are subject to change, and this can happen when a new trend hits the mainstream (or simply when regulators catch on, and finally understand it). There is always the chance that Austrac and ASIC may revise their stance on bitcoin. What then?
Bajalan has tried to be compliant with current KYC requirements, by working with Edentiti Pty Ltd, a company that provides ID verification, to help verify users of the exchange. This firm has been government approved, he points out.
“I believe currently Australia is in a better situation to adapt bitcoin compared to US. This is mainly due to US having many states and different laws,” says Bajalan.
The Australian Taxation Office took an almost identical stance to the US IRS in June, warning that although no specific rules have been passed relating to bitcoin, it is aware of the cryptocurrency, and that people should be keeping detailed records of their transactions, in case it decided to levy taxes on bitcoin-based profits. The ATO said that it was able to track transactions in bitcoin.
BTC Markets doesn’t yet offer margin lending, although this could be on the cards as the site builds liquidity and volume. In the meantime, there are other options. BTC.SX, which CoinDesk covered in May, is still going strong, according to founder Joe Lee.
“Trading volume is growing healthily alongside our user base. The startup has moved into Fishburners, a startup space in Sydney and is going through seed funding capital raising now,” he says.
There are other promising signs of bitcoin activity in Australia. Bajalan and Lee both attend the same Sydney-based Meetup group, and at least one pub is now accepting bitcoin payments (and there are a few more companies mentioned here).
Coinjar.io is also providing the ability to buy bitcoin using a web-based wallet, along with merchant accounts to take bitcoin payments. Hopefully services such as Coinjar will step in where others such as BitInnovate appear to have failed (that site, which also offered bitcoin buying and selling, has closed).
With the Australian Broadcasting Corporation (ABC) now publishing a bitcoin guide, and with a local group organizing a more formal bitcoin-related group with a constitution, things may be looking positive for the burgeoning bitcoin community down under, although as with many countries, there is still a long way to go until it could be considered mainstream.