The Cyber Security Industry Advisory Committee, the Australian cyber security adviser, highlights several cryptocurrency-related opportunities for the government to pursue as it prepares for the global integration of cryptocurrencies.
The study published by the Australian Department of the Interior and titled Exploring Cryptocurrencies cites the rise in cryptocurrency adoption, as the country undergoes a rapid transformation to an advanced digital economy, “there is a need for regulatory setups that provide greater clarity and confidence in how the cryptocurrency market in Australia can operate.”
In the study, the Industry Advisory Council explores cybersecurity considerations with respect to the following aspects: What cryptocurrency is; the risks associated with cryptocurrency; the nexus between cryptocurrency and crime; the current state of domestic and international cryptocurrency regulation; and the opportunities cryptocurrency presents.
Finally, the recommendations provide some forward-facing steps to help foster the secure adoption of cryptocurrencies in Australia, address crypto-related crime, as well as support crypto-driven opportunities in Australia.
Cryptocurrencies, according to the study, are crypto-assets (crypto), also known as coins or tokens. They are an emerging asset class without a physical form – they are digital tokens stored in a digital ‘wallet’ and are both speculative and opaque.
As of the risks associated with cryptocurrencies, the study lists the following: volatility – because of the speculative nature of cryptocurrency, in that its value does not come from physical or tangible assets; storage in digital wallets – which become an attractive target for cybercriminals due to anonymity issues; and exchange risk – which can wipe huge amounts off cryptocurrency values in a matter of hours.
Regarding the nexus between cryptocurrency and crime, the study suggests that cryptocurrencies are being widely used for cybercrime exploits, including ransomware attacks, business email compromise, malicious cryptocurrency mining and the sale of malware. To prevent such risks, the Advisory Council highlights the need to adapt traditional law enforcement methodologies, as well as implement appropriate regulation of cryptocurrencies, their use and exchange, among other actions.
About the current state of domestic and international cryptocurrency regulation, the study mentions that Australia’s approach to regulating crypto-assets to date has been ‘light-touch’, seeking to expand existing financial services regulation to digital assets. As of the international context, global bodies such as the Financial Action Task Force (FATF) and Basel Committee continue to express their concern over the current crypto regulatory environment.
Finally, cryptocurrencies present opportunities to use the Blockchain technology, with a decentralized record of transactions and currency ownership that underpins cryptocurrency. The study also mentions the increase in use of cryptocurrencies as a means of payment alongside fiat currency, as consumers, with quick and irreversible payments, low transaction fees and improved transactional security, start to benefit. In addition, the significant energy used by some cryptocurrency mining has been a concern for many large players in the crypto industry, who are actively attempting to offset carbon emissions, including positioning themselves as buyers of excess power.
Four Highlights
The federal advisory recommends exploring four key areas that can “help ensure the safe adoption of cryptocurrencies in Australia”: minimum cybersecurity standards, capacity (awareness through specialized training), operator monitoring and transparency approach. .
With the primary goal of reducing cybersecurity threats targeting cryptocurrencies, the committee recommended mandatory minimum cybersecurity standards for Australian cryptocurrency exchanges and companies holding cryptocurrencies. Kraken managing director for Australia crypto exchange Jonathon Miller believes that, “minimum security standards and increased resourcing to combat sophisticated cybercrime will go a long way in protecting investors.”
Additionally, the notice suggested an increased focus on increasing public awareness through specialist training on available crypto opportunities and corresponding cybercrimes and threats. It recommends a “follow the lead” approach in which Australia learns and implements international best practices in the crypto space.
Highlighting the inherent pseudonymity of cryptocurrencies, the committee calls for greater transparency around registered cryptocurrency exchanges and Blockchain-based companies:
“Educational programs with accurate and consistent messaging will enable investors to better understand investment and cybersecurity risks, while helping to demystify cryptocurrency for all Australians.”
Other Suggestions and Ideas
In addition to the recommendations, the Cyber Security Industry Advisory Committee highlighted a number of opportunities that accompany the incorporation of cryptocurrencies. The study reveals the disruptive potential of Blockchain to tokenize financial assets, including loans, carbon credits, and real estate.
In addition, accepting cryptocurrencies “allows companies to access a new group of customers.” Finally, the study reveals that offsetting carbon emissions is one of the biggest opportunities as cryptocurrencies make their way into the mainstream.
Voyager Digital Co-Founder and CEO Stephen Ehrlich weighed in on why patience is key for crypto businesses. He explained that, “In 2021, Bitcoin outperformed every major asset class, outperforming crude oil, NASDAQ, the S&P 500, and gold. Also, the number of “hodlers” is trending positively, indicating the long-term viability of cryptocurrencies.” Ehrlich also notes that the overall growth of the crypto ecosystem manifests in the introduction of benefit programs that allow companies to let employees take a portion of their paychecks in Bitcoin (BTC).
Citing economic equality as one of the main advantages, Ehrlich also stated that cryptocurrencies provide access to segments of investors who missed previous booms.
By Audy Castaneda
