This Australian fintech leader says cryptos won't replace traditional currencies in 'another three lifetimes'

Jack Guez/ AFP/ Getty Images

The value of bitcoin lies in its use as a finite commodity protected by rock-solid cryptography, rather than a currency used to buy goods and services, according to Loretta Joseph, chair of the Australian Digital Commerce Association (ADCA).

Joseph spoke to Business Insider following reports that Australian crypto trading exchanges must now comply with standards set out by financial intelligence agency AUSTRAC.

The announcement followed an 18-month consultation period between AUSTRAC and the ADCA.

“We have defined crypto as a commodity,” Joseph said. “It’s not a currency for use as a means of exchange.”

“There was recently a key legal case in New York which defined bitcoin as a commodity. So I think central banks are starting to become less worried about perceived risks to the financial system.”

So while bitcoin and other cryptos are an exciting new asset class, if you think they’re about to turn the global financial system on its head — think again.

“That won’t happen in my lifetime, my daughter’s lifetime, or another three lifetimes,” Joseph said.

“To get the scalability, you’d need huge adoption. You can’t tell me we’ll go and replace entire monetary systems.”

“Do I think bitcoin is going to be a game-changer for global economies? No I don’t.”

Joseph is currently working with the OECD (Organisation for Economic Co-operation and Development) to develop a set of international regulatory guidelines for cryptocurrency exchanges.

She offered her views on how they should be defined in that area as well.

“People should stop calling them exchanges because they’re not. What they are is a digital marketplace,” she said.

“Exchange licenses are expensive because they have significant legal protections as a regulated public utility.”

Joseph explained that when a stock exchange such as the ASX clears a transactions, it also takes on third-party risk as a guarantor. That’s not the case for a digital marketplace.

“They don’t take on the risk. All they do is match buyers and sellers,” Joseph said.

As for the future of the trading infrastructure around cryptos, Joseph said it will be hard to predict given the new stage of the technology.

“Over time there might be some consolidation around digital marketplaces, but it’s a strange asset class in the sense that if you look at the liquidity, the miners hold the coins. So as with any new asset class, you get nuances.”

“I think derivatives are where the institutional money will go, because you don’t have to hold the actual underlying asset. So it’s a simpler process in terms of the liquidity.”

Last December, two futures trading platforms in Chicago — the CME and its smaller competitor the Cboe — both launched bitcoin futures trading. But US regulators have stalled in approving the introduction of a bitcoin exchange traded fund (ETF).

As for individual cryptos, Joseph said she was more optimistic about the prospects for bitcoin and ethereum, given their more dominant position in the market.

“Over the next 10 years, I think you’ll see a hardening of the protocols in the coding and technology behind bitcoin and other cryptos, which will lead to increased levels of security.”

For now, Joseph is continuing work with the OECD to establish international guidelines — which includes setting up frameworks in new jurisdictions such as Bermuda and Mauritius.

“No regulation is bad, but over-regulation kills the market,” she said.

“We’re working closely with the OECD to set up a strong standard, so that you don’t get jurisdictional arbitrage with large price discrepancies across different markets.”

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