You need nothing short of “a miracle” to succeed with an initial coin offering (ICO) in Australia, a local industry leader told the government this week.
At a Select Committee on Financial Technology and Regulatory Technology hearing on Feb. 20, Dr. Jemma Green said her blockchain firm had succeeded despite, not thanks to, government policy.
Dr. Green is the executive chairman and co-founder of Australian blockchain energy firm Power Ledger, which develops blockchain-based software for decentralized energy trading. ZDnet reported her remarks on the day of the hearing.
Dr. Green appeared before the committee in her capacity as a fellow of domestic blockchain industry body Blockchain Australia. Earlier this year, Blockchain Australia published a report, together with the RMIT Blockchain Innovation Hub at RMIT University, providing detailed recommendations for the taxation of ICOs.
Drawing on this research, Dr. Green argued that current policy adversely impacts local ICOs by classifying their proceeds as income, in line with legacy tax guidelines. She stated:
“Many countries —- for example Switzerland —- are changing it to put them on capital accounts, which is moving the taxing point to when proceeds are used to build a platform which generates income. In Australia, the proceeds are being taxed as income and as a result of this, Australia is not an attractive proposition to undertake one of these ICOs.”
Blockchain Australia advocated a policy that would apply the same treatment to ICOs as that offered to firms’ proceeds from a traditional capital raise. It would then apply this to all projects, including the early offerings that launched back in 2017.
Dr. Green pointed to the report’s findings that, while globally $26 billion has been raised through ICOs to date, Australia has captured just 0.79% of this market.
Power Ledger, which has expanded to nine countries, owes little of its success to the government’s approach, in her view. Dr. Green went so far as to argue that:
“It’s really kind of a miracle that we exist in the first place, but there could be many of these miracles if we actually set the tax regulation around ICOs to be fit for purpose.”
Revising the system could reap benefits for fiscal revenue too, she claimed, allowing the government to capture the “bounty” when such firms become profitable.
Dr. Green pointed to challenges for the industry in Australia that extend beyond questions of taxation. She wrote:
“Education will play a significant role in achieving real, progressive change in Australia. We can’t expect policy makers to embrace emerging technology and a new system that they fundamentally don’t understand.”
As previously reported, the Australian Securities and Investment Commission last year revamped its ICO and cryptocurrency trading framework. Its intervention, however, notably omitted any update to taxation and consumer protection policy, for which it referred industry participants to existing approaches as determined by other regulators.