Currently, most Bitcoin mining occurs in the US, Kazakhstan, Russia, Canada, Malaysia and Iran. Some networks face great challenges. In Kazakhstan, for instance, power has reportedly been rationed away from miners to conserve energy during electricity shortages, forcing miners to leave the country.
Reports estimate this will cost Kazakhstan’s economy US$1.5 billion (or A$2.14 billion) over the next five years, including US$300 million in tax revenue.
Crypto isn’t entirely ‘anonymous’
Crypto has come a long way since Bitcoin’s anonymous launch in 2009. There are now thousands of cryptocurrencies, with an estimated total market cap of US$1.66 trillion (about A$2.36 trillion).
It’s often stated, including in the recent report from Russia’s central bank, that the anonymity of cryptocurrencies enables illegal activity such as money laundering, terrorism financing and drug trade.
This isn’t entirely true. In fact transaction history on public blockchains, such as Bitcoin and Ethereum (the largest by market capitalisation), is public.
Many governments (including those of Australia and the US) collaborate with large private blockchain analytics firms to monitor citizens’ crypto wallet addresses and transactions. They do this to mitigate risks of money laundering and tax evasion.
Contrary to popular belief, most cryptocurrencies aren’t anonymous; they are pseudonymous. If a person’s identity is linked to their wallet address via a central touch point, such as a cryptocurrency exchange or an email, that wallet is traceable to the individual.
Research (commissioned by Zcash but carried out by the Rand corporation) found there isn’t widespread illicit use of “privacy coins” preserving users’ anonymity.
Policy will determine future directions
Cryptocurrency continues to become increasingly mainstream as an investment asset class, technological infrastructure and a social experiment in non-state-based infrastructure.
With this, crypto communities hold growing influence in public policy debates. For example, crypto advocates were able to slow down a major federal government infrastructure bill in the US last year.
Yet jurisdictions are choosing different pathways regarding policy and regulation. Some such as China and Russia view it as a fiscal and ideological challenge to sovereign monies. Others view it as an opportunity for innovation, investment and economic growth.
As different approaches emerge, 2022 may be a defining year for both the crypto industry and those competing to either ban or welcome it.
Past examples suggest countries that welcome crypto networks reap economic benefits through innovation, investment, jobs and taxes. Business benefits of adopting crypto as a digital asset include access to new demographics and technological efficiencies in treasury management.
At the same time, the effects of policy and regulation on the industry demonstrates cryptocurrency isn’t a completely decentralised thing that exists only on the blockchain.
Australia’s position
In the competition to limit but benefit from cryptocurrency, Australia has emerged as a potential destination of “crypto friendliness”. A report published in October by the Senate Select Committee on Australia as a Technology and Financial Centre looks favourably on cryptocurrencies.
It proposes market licensing for crypto exchanges, streamlined taxation arrangements and a regulatory structure for “decentralised autonomous organisations”, or DAOs. These function using the same philosophy of self-governance as decentralised cryptocurrency networks, using blockchain technology and cryptocurrency tokens to manage participation and enforce rules.
Australia’s choice is to capture the enormous economic potential of decentralised digital assets. How this will impact the national economy remains to be seen. But if history is a lesson to be learned from, we can expect policy to shape outcomes.
Story: Kelsie Nabben, Researcher / PhD Candidate, RMIT Blockchain Innovation Hub / Centre for Automated Decision Making & Society / Digital Ethnography Research Centre, RMIT University.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
