Future of Blockchain in Australia: Five Predictions for 2019
By Adrian Harrison
2 018 was a challenging year for initial coin offerings (ICOs) and our local blockchain ecosystem. As more and more crypto whales became selective with their investments and began pulling funding, the viability of an increasing number of tokens was scrutinised.
We are, however, at a critical inflection point. Throughout time, every period of technological progress and successful innovation could not be sustained without a preliminary stage of overcoming initial setbacks, fears and criticism levelled at the latest spate of emerging technologies that defined a particular era. Blockchain is no different. As our local ecosystem continues to mature here in Australia, there is much to remain excited about when it comes to the future of blockchain.
Over the last 12 months, we saw Australia leading the International Standards Organisation in developing standards for blockchain and distributed ledgers around the world. This was the year that saw CBA’s blockchain-enabled global trade platform in action with the delivery of 17 tonnes of almonds. Brisbane Airport became the world’s first crypto-friendly airport with almost all of the retailers in airport terminals now accepting various digital assets such as Bitcoin, Bitcoin Cash and Ethereum — making it a leading destination for crypto travellers.
So what will 2019 hold? Here are the top 5 trends and themes to look out for as Australia’s blockchain ecosystem continues to evolve.
Top 5 predictions for 2019:
1) Launch of Australia’s first stablecoin. Australia’s favourable regulatory environment means we are in an excellent position for the unveiling of the first digital currency pegged to the Australian dollar. With multiple parties already in the developmental phase for a coin like this, it’s only a matter of time before we see it launched. The emergence of new local exchanges in Australia could help spur this on, and that will only further help grow our ecosystem here by encouraging more adoption of digital currencies and facilitating the trading of these securities at a broader scale. Ultimately, these are all positive signs and I predict it will make it a lot easier for cryptocurrencies to be regulated.
2) Increasing regulation and regulatory understanding of crypto exchanges. At Huobi Australia, we think it is important for regulators like ASIC to be able to strike the right balance between innovation and consumer protection particularly when it comes to companies opening up an ICO to everyday Australian investors.
Time and again, ASIC has shown a keen eye for working closely with our blockchain community. The release of their latest regulatory guidelines in October on ICOs meant that Australian start-ups looking to raise funds through an ICO could have a deeper understanding of their obligations under the Corporations Act and ASIC Act. It came as part of a multi-pronged approach adopted by ASIC and senior government stakeholders that saw the removal of double taxation on digital currencies, driving international blockchain standards, and ASIC’s launch of a consumer-facing publication on ICOs on their MoneySmart website.
What we have seen is a measured approach from ASIC who has rightly intervened on more than one occasion to prevent several misleading ICOs or token-generation events targeting under-educated retail investors. Only with better regulatory guidance and scrutiny can we work together towards lifting popular understanding of digital currencies and how they work, as well as finding the right balance in ensuring the correct regulatory and policy settings are in place to encourage further innovation within our local blockchain ecosystem.
3) Rise of Bitcoin or crypto ETFs: While the United States Securities and Exchange Commission or SEC has turned down nine previous attempts to introduce a crypto-focused exchange traded fund (ETF), general consensus seems to suggest that a physically-backed fund could garner approval from regulators. Given the rising popularity of exchange traded funds as an excellent low-cost instrument for passive investors seeking diversification, the groundswell behind a crypto ETF has meant that the tides are shifting. The SEC has said it can approve a bitcoin ETF on the proviso that correct controls are in place to deter and prevent “fraudulent and manipulative acts” but a regulated market of significant size related to bitcoin is necessary. If approved, Australia could well and truly follow suit, particularly if the larger institutional players step in.
4) Widespread movement of institutional investors into crypto. The disruptive potential of cryptocurrencies as an emerging asset class for investors seeking diversification means they can no longer be ignored. Fidelity, Blackrock and Goldman Sachs have all signalled their interests in this space by launching institutional platforms dedicated to bringing cryptocurrencies to institutional investors.
Fidelity’s offering, known as Fidelity Digital Asset, is currently in the process of onboarding its first customers now, with general availability scheduled for early 2019. Its launch could represent the largest push into cryptocurrency by an institutional asset manager, with more soon to follow suit.
Despite the undeniably bearish picture for crypto markets, a report by digital asset management fund Grayscale Investments in July found that the majority of capital inflow this year into cryptocurrencies was coming from institutional investors. Total investment reached over $248.4 million in June this year — the strongest ever fundraising period since 2013.
Now, particularly with the growing proliferation of enterprise-grade custody solutions and cryptocurrency trading execution platforms, we expect there to be a broader theme of institutional investors entering the market, prompting uptick in crypto trading volume and making them more mainstream.
5) More interesting use cases as sector matures: Over one in 10 (13%) of fintechs in Australia today operate in the blockchain and cryptocurrency space, according to the latest EY Fintech Australia Census data. Blockchain-based solutions have already found prominence with their potential to improve both the delivery of public services and trust within the public sector. In July, we saw the federal government unveil a five-year $1 billion deal with IBM to accelerate the adoption of blockchain, artificial intelligence and quantum computing in the public sector.
One of the real challenges for blockchain at present has been the extent to which present use cases for the technology itself are costly when it comes to implementation. While the federal government’s Digital Transformation Agency has been working with a number of government agencies to develop prototypes for the use of blockchain to deliver services — including with the Department of Human Services for welfare payments and the Department of Home Affairs for cargo settlement — without appropriate standards and policy settings in place, transitioning to a permissionless distributed ledger environment remains a significant hurdle.
But we are at a tipping point. As blockchain technology continue to become more mainstream, early-stage blockchain optimism will be met with a shrewd pragmatism as new and exciting use cases for the technology continue to emerge. 2019 will bring more novel use cases as we see blockchain being applied to non-traditional industries beyond the realm of financial services and the public sector. Whether it be in healthcare, agriculture, supply chain and logistics, real estate or law, the future for blockchain remains bright and promising.
This article was featured on https://www.theaustralian.com.au/business/technology
Adrian Harrison is the CEO of Huobi Australia
