Originally published 2021-11-22.
In November 2021, Jane Hume, then Australia's Minister for Superannuation, Financial Services and the Digital Economy, told an Australian Financial Review audience that cryptocurrency was "not a fad" and that Australia should take it seriously rather than fear it. Her message was that the country should tread cautiously but not fearfully, and that people who dismissed crypto risked looking like those who once doubted smartphones, the internet and email.
Her remarks came only days after a senior Reserve Bank of Australia (RBA) official had delivered a very different message, warning that crypto assets were highly risky and that their prices might not hold. The contrast captured a debate many governments were having at the height of the 2021 crypto boom: is this a technology to embrace and regulate, or a speculative bubble to warn people about?
What Jane Hume said
Hume, a Liberal senator for Victoria since 2016, held the financial services and digital economy portfolio in Scott Morrison's government from December 2020 to May 2022. In her speech she argued that both industry and government needed to accept that crypto was here to stay. She compared sceptics to people who assumed nobody would want music and a phone on the same device, or who believed in 1995 that the internet would remain a niche for enthusiasts.
She also said decentralised finance built on blockchain technology could offer major opportunities and that Australia should not be left behind out of fear of the unknown. Earlier in 2021 she had said that adult investors should be free to decide for themselves whether to put money into higher-risk assets such as crypto, while stressing that the sector was still subject to Australian law.
The Reserve Bank's warning a few days earlier
On 18 November 2021, Tony Richards, the RBA's head of payments policy, gave an online speech to the Australian Corporate Treasury Association titled "The Future of Payments: Cryptocurrencies, Stablecoins or Central Bank Digital Currencies?"
Richards argued that cryptocurrencies did not meet the usual tests of money. They were rarely used to buy things, almost nothing was priced in them, and their values swung too much to be a reliable store of wealth. He suggested households might start paying more attention to regulators' warnings about investing in something with "no issuer, no backing and highly uncertain value." He also questioned survey estimates suggesting that around one in five Australians held crypto, noting that online panels can be unrepresentative.
Among the risks he listed were extreme price volatility, the heavy electricity use of proof-of-work mining, the use of crypto for tax evasion and other financial crime, and the possibility that, as regulation tightened and better digital payment options appeared, many coins could become niche and their high valuations might not survive.
Why a minister and a central banker sounded so different
The two positions were not as contradictory as the headlines suggested. Ministers responsible for innovation and the digital economy want to attract investment, jobs and start-ups, and they worry about rules driving businesses offshore. Central banks are responsible for financial stability and the payments system, so their instinct is to point out what could go wrong.
Both, in fact, called for caution. The real difference was emphasis: Hume focused on the opportunity of the underlying technology, Richards on the risks of crypto as an investment and as money. Separating those two ideas is useful for anyone trying to make sense of the topic. Blockchain technology can be important even if a particular coin is a poor investment, and vice versa.
What happened next
On 8 December 2021 the federal government announced a plan to reform Australia's payments system for the digital age. It said businesses that help Australians buy, sell or hold crypto and other digital assets would be brought under appropriate oversight and licensing, and that it would study the feasibility of a central bank digital currency. Consultation was planned for 2022.
Markets soon tested both views. Bitcoin had peaked at around US$67,500 on 7 November 2021, just before the two speeches. It ended that year almost 30% lower. In May 2022 the TerraUSD stablecoin and its sister token Luna collapsed, wiping out tens of billions of dollars in a week, and in November 2022 the FTX exchange filed for bankruptcy. Those events strengthened the case Richards had made about risk, while the steady growth of regulated crypto products and licensing regimes around the world suggested Hume was right that the sector would not simply disappear.
The Morrison government lost the May 2022 election, and Hume moved into opposition, later holding finance and other shadow portfolios. Work on licensing rules for digital asset platforms continued under the new Labor government.
Common myths about crypto and government
- "If a government regulates crypto, it is guaranteeing it." Licensing aims to make exchanges and custodians safer and more transparent. It does not protect anyone from price falls.
- "Crypto is completely anonymous." Most blockchains are public ledgers, and exchanges in many countries must verify customers' identities, so transactions can often be traced.
- "A minister's endorsement means it's a good investment." Policy statements are about the industry, not about whether any particular coin will rise.
- "Crypto gains aren't taxed." In Australia, as in many countries, the tax office treats crypto disposals as taxable events in most cases.
Practical takeaways if you are thinking about crypto
- Only invest money you could afford to lose entirely; prices can fall by more than half in months.
- Use exchanges that are registered or licensed where you live, and switch on two-factor authentication.
- Be wary of anyone promising guaranteed returns, especially via social media or messaging apps; these are classic signs of scams.
- Keep records of every purchase and sale for tax purposes.
- Consider speaking to a licensed financial adviser before making large decisions.
The 2021 exchange between a minister and a central banker remains a useful lens: crypto can be both a serious technology and a risky asset at the same time.
Ways to buy #Bitcoin and other #crypto like #Ethereum ( #ETH) , #Cardano ( #ADA) , #BNB and more: Join #Binance, the biggest exchange in the world, buy, earn and spend crypto with their Visa Debit Card: https://accounts.binance.com/en/register?ref=13380876
Join #CryptoCom , Use our referral link https://crypto.com/app/m524bfdwja to sign up for Crypto.com and we both get $25 USD 🙂 You can earn interest and use their Visa Debit Card.
Sign up with our referral link and earn up to 100 Euros in free #BORG to kickstart your crypto portfolio with #SwissBorg with your first transfer of 50 Euros! https://join.swissborg.com/r/alkimoKOWX
Earn passive income on many cryptocurrencies!
Join #Nexo , a great app to earn passive income, and earn $10 https://nexo.io/ref/d5js2kmhbw
Sources: Speech reported by The Guardian (22 November 2021); Reserve Bank of Australia: Tony Richards, The Future of Payments (18 November 2021); Treasury ministers: Reforming Australia's payments system for the digital age (8 December 2021); Wikipedia: Jane Hume; Wikipedia: Cryptocurrency bubble.
COMMENTS