Thank you for that warm welcome. It’s wonderful to be here for the first time as Assistant Minister for Superannuation, Financial Services and Financial Technology — it’s an honour to take on this important role at such a dynamic time for your industry.
Today, I welcome your invitation to go ‘beyond the hype’ and talk about blockchain; its importance to the Australian economy; as well as the Morrison Government’s forward-looking approach to promoting innovation and competition in Australia’s financial system.
Importance of blockchain
They say time flies when you’re having fun, and for some of us it’s hard to believe that blockchain technology has now been around for just over a decade. Yet, it’s fair to say we’re still only sitting on the cusp of what this technology can do.
The early applications of blockchain were in the financial services sector, with Bitcoin being the most famous example. But in recent years, we’ve seen blockchain technologies used in other parts of the economy including agriculture, supply chain operations and digital identity management.
Benefits of technology
This is, of course, a good thing. In a broad sense, the uptake of new technologies are good for businesses, good for consumers, and they’re good for the Australian economy.
Technological developments not only provide Australian businesses with the opportunity to access new markets, but they can also improve productivity. And as a result, consumers benefit by having access to improved products and services.
I don’t need to tell people in this room, but blockchain, in particular, is a technology with enormous transformative potential — it can improve the efficiency of our existing processes, and help us develop new ways of doing things.
And just as there are opportunities for you, I believe there are opportunities for government and regulators in using blockchain.
I’ve been pushing this case for a while now. Indeed, some of you may recall my article, as Chair of the Parliamentary Friends of Blockchain, where I argued that blockchain presented an opportunity to not only save public money but also make government smaller, faster and more efficient.1
With equal enthusiasm, I’d also argue that taking up technologies, such as blockchain, can give Australia an edge on the international stage.
It’s a competitive industry. So it’s important we keep pace with the rest of the world when it comes to new technologies — if we’re not constantly pressing ahead, then we risk going backwards.
In other words, we want to help position Australia as a global leader in blockchain technology.
That’s why the Australian Trade and Investments Commission have sponsored Australian Blockchain Missions to Consensus Week in New York2 — enabling Australian blockchain businesses to showcase their products to global influencers, investors and technology partners.
That’s why we established the UK-Australia FinTech Bridge3 — providing Australian blockchain businesses and other Fintechs with the opportunity to access the UK market with greater ease.
And that’s why the Government made grants in recent Budgets to support the international promotion of the Australian FinTech sector.
The Australian influence
While blockchain is still being experimented with in many sectors and there’s much more work ahead of us all, I’m pleased to acknowledge that Australia has a growing and vibrant industry — evident here today.
At this conference, we’ve already heard from the ASX — who are making use of blockchain in their CHESS Replacement Program — and you will hear from CBA, who partnered with the World Bank to launch the first blockchain oriented bond trading platform.
This reinforces my earlier point that blockchain has the potential to transform industries.
In financial services, for example, blockchain is being applied to examine new ways of payments and remittances, and to enable more efficient compliance with anti-money laundering and counter-terrorism financing regulations.
As another example, in 2017 ANZ and Westpac ran a successful trial with IBM using blockchain to digitise the bank guarantee process used for commercial property leasing
In the long-run, these products will not only reduce operating costs but also provide consumers with more options in how they interact with their finances.
In another example, given the significance of Australia’s agricultural sector, it’s great to see the potential for blockchain and the growth of AgTech in the farming sector.
Supply chain management is one of these potential applications and we’ve a seen a number of Australian companies already making their mark.
Last year, we saw the Commonwealth Bank coordinate a trial shipment of almonds from an orchard in Victoria, with every step in its journey tracked using blockchain.
Another company – Beefledger – is currently developing a process for tracking beef exports to Asia using blockchain, to protect against fraud and prove the quality of Australian beef from paddock to plate.
These applications have the ability to give farmers and buyers a way to receive fairer compensation and increase trust, transparency and efficiency.
FinTech and AgTech are just two real-world examples of the influence blockchain can wield over the development of our industries, but I’m sure you will hear about many others during this conference.
Issues and opportunities
So while there’s little doubt about blockchain’s potential, a prudent government can’t ignore the challenges faced by your sector.
On the supply side, the success of Australian blockchain businesses will, in a large part, be contingent on access to talent.
Although the supply of blockchain-related skills has increased in recent years, it hasn’t kept pace with demand.
Compared to other countries, Australia has a relatively small proportion of ICT graduates, with Singapore, Finland and New Zealand all boasting a greater share.
But, with a number of our universities now offering blockchain-related courses and modules- including the University of Technology here in Sydney, RMIT and Swinburne University to name a handful – there is increased interest in this space and more study options for Australian students.
In addition to access to talent, the success of blockchain hinges on access to capital — and the signs are promising.
We’re seeing the level of capital available to blockchain related businesses, as part of the broader FinTech sector, continue to rise.
According to EY’s 2018 FinTech census, in the 2018 financial year, the FinTech sector recorded 111 fundraisings at an average of $9 million per fundraising.
On a global level, it’s clear blockchain specific funding has grown exponentially over the past decade.
A report by Data61 and the Australian Computer Society stated that cumulative venture capital funding has risen from AUD $1.9 million in 2012 to AUD $7.6 billion as of November 2018.
In terms of demand, more and more businesses are providing consumers with the capacity to interact directly to buy goods or services.
Arguably, the most famous examples – Uber, Lyft and Ola – have arisen in transport or ride sharing related services.
The growth of these disintermediated services has given rise to the so called ‘peer-to-peer economy’, and its growing prominence indicates opportunities for blockchain-related businesses.
First, peer-to-peer services could make greater use of blockchain technology, given their disintermediated nature.
Secondly, perhaps more importantly, the rise of the ‘sharing economy’ suggests both consumers and businesses may be ready to accept and embrace decentralisation.
When talking about demand, we also need to recognise the potential for Australian blockchain businesses to tap into the demand deriving from Asia’s growing middle class.
As more and more global activity shifts towards Asia, opportunities for Australia to service these markets will undoubtedly increase.
In sum, if supply factors continue to improve, and demand follows its current trajectory, the future looks bright for blockchain-based businesses in Australia.
Promoting innovation and competition
So it’s increasingly important that the Government takes practical steps today to support growth tomorrow.
As the Prime Minister said recently, driving the uptake of new digital technologies to promote innovation and competition in our financial system is a key part of our economic plan.4
For example, we’re committed to ensuring our regulatory frameworks encourage blockchain businesses to turn a promising future into a reality.
And on that front, we’ve recently announced the development of a National Blockchain Roadmap to position Australia as a global leader as part of this vision.5
In forging this path, it’s important our regulatory settings continue to serve a dual-function: promoting innovation, and protecting Australian consumers.
Indeed, the Government has already passed or proposed a number of initiatives along these lines:
- We’ve introduced tax incentives for early stage – or angel - investors and new arrangements for venture capital limited partnerships have incentivised investment in innovative start-ups.
- We’ve removed the double taxation on cryptocurrencies, enabling these instruments to be treated like money for GST purposes.
- We’ve made changes to laws around crowd-sourced equity funding to open up financing avenues for start-ups which did not previously exist.
- We’ve proposed an enhanced regulatory sandbox, which when passed by Parliament, will give more businesses an opportunity to evaluate their product through initial market testing prior to seeking the appropriate licenses from ASIC.
Consumer Data Right
While each of these initiatives plays a role in supporting blockchain, I believe one of the most important policy changes on the horizon is the introduction of the Consumer Data Right.
Starting with Open Banking and eventually applying to telco and energy services, the Consumer Data Right will make it easier for consumers and businesses alike to find the provider that best meets their needs.
It’s an exciting time as we reach some major milestones in the shift to Open Banking:
- The Australian Competition and Consumer Commission has finished consulting on the rules.
- The Data Standards Body has completed consumer testing and consultation.
- And, the Government will soon re-introduce the legislation to Parliament.
I believe the Consumer Data Right is a great example of effective collaboration between industry and the Government.
It has been a process where we have welcomed your views and I note that, according to the EY Census in 2018, there remains some concern that consumers may be unwilling to share their data.
I believe this highlights the importance of both security, but more broadly, trust.
If blockchain businesses are to gain a foothold in the Australian market, consumers must be willing and ready to engage with them.
That’s why, in the context of all the reforms we’ve pursued so far, the Government has been focused on ensuring that appropriate consumer protections remain in place and the integrity of the financial system remains sound.
The existence of these protections is not a zero-sum game. Blockchain businesses need consumers and businesses alike to trust that the protections embedded in the regulatory regime are rigorous and ensure the stability of the system in which they operate.
Blockchain is a potentially transformative technology, there’s no doubt about it.
But if we go ‘beyond the hype’, I think you’ll agree the Morrison Government is taking a practical, structured approach.
The work we’re doing to encourage blockchain innovation and promote competition in our financial system forms part of our economic plan for a stronger economy.
As well as taking a real-world approach, in my new role as Assistant Minister for Superannuation, Financial Services and Financial Technology I intend to continue to take a collaborative approach.
Our record is strong in this regard. The Government welcomed the establishment of FinTech Australia and we continue to engage closely. And in the spirit of greater collaboration, we drove the establishment of the Government’s FinTech Advisory Group.
I will continue to draw on this advisory panel for insights into the emerging trends and regulatory problems facing blockchain-based businesses and the sector in general.
Ultimately, whether it’s through FTAG, FinTech Australia or my conversations with you here today, we, as a Government, are committed to better supporting you.
Unveiling of blockchain logo
Finally, before I go, I am delighted to unveil the new logo for Blockchain Australia.
Can I ask Nick, Adam, Ron and David on stage?
I first got to know Nick and the team at ADCA two years ago I was asked to be co-convenor of the Parliamentary Friends of Blockchain.
ADCA has been a strong voice helping build understanding of blockchain technology in government and advocating for Australia to be among the world leaders in taking advantage of blockchain.
More recently, I have come to know Adam and David and the team from Blockchain Australia. Their efforts at building the community network among blockchain enthusiasts has been pivotal in building the skills base that we will need as a country.
So I am absolutely delighted that ADCA and Blockchain Australia have decided to merge. Having a consistent and united voice advocating for the responsible adoption of blockchain technology and working with partners in government, business and the wider community is an important step. It certainly makes it easier for Government when industry stakeholders deliver a clear and consistent message.
So I would like to congratulate the Boards of ADCA and Blockchain Australia in coming together as a single, stronger organisation and am delighted to mark the occasion by officially unveiling the new logo.
Thank you very much for having me today.
1 Hume, J 2018, ‘Blockchain revolution in Canberra’ Australian Financial Review 10 December
2 Austrade ‘Australian Blockchain Mission to Consensus 2018’ https://www.austrade.gov.au/events/events/au-blockchain-mission-to-consensus-ny
3 Treasury ‘UK-Australia FinTech Bridge’ https://treasury.gov.au/fintech/uk-australia-fintech-bridge