Monochrome Recap | 20 August - 31 August 2022


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AUSTRALIAN REGULATORY UPDATE: Australian Treasury Department to Begin “Token Mapping” Cryptocurrencies

On 22 August, Australia’s newly-elected Labor Government announced it would start a review of how cryptocurrency assets are managed and regulated to further protect investors. This will primarily involve a ‘token mapping’ industry consultation, which will begin in 2022. According to a joint statement by newly-instated Australian Treasurer Jim Chalmers, the aim of this review is to “identify notable gaps in the regulatory framework, progress work on a licensing framework, review innovative organisational structures, look at custody obligations for third-party custodians of crypto assets and provide additional consumer safeguards.”

Australia’s proposed token mapping approach will be a world-first, as it has not been done anywhere else in the world. Completing token mapping has been proposed since March 2022, when the Australian Government released a consultation paper that outlined how it would classify crypto-assets through a token mapping approach. The purpose of the token mapping process is to classify and ‘map’ crypto assets into definable groups according to their features and characteristics. The process will classify tokens based on a range of factors, including the utility of the crypto-asset and other technological features. By classifying different types of crypto-assets the Australian Government aims to regulate the industry based on existing laws, whilst enacting new laws where needed.

Mr Chalmers said, “[the] previous government dabbled in crypto asset regulation but prematurely jumped straight to options without first understanding what was being regulated… The Albanese government is taking a more serious approach to work out what is in the ecosystem and what risks need to be looked at first.”

The reception to the Australian Treasurer’s announcement was varied. Proponents of the announcement included Caroline Bowler, Chief Executive Officer of cryptocurrency exchange BTC Markets, who said that cryptocurrency is distinct from traditional financial products, and as such, regulations needed to be applied based on the relative level of risk each respective cryptocurrency poses. This sentiment was expressed in the following quote:

“The Treasury consultation paper in March 2022 spoke of regulating according to risk. It recognised that crypto-assets are distinct in character compared to traditional financial products. The issues of trust and information asymmetry may be mitigated using blockchain technology. As a result, any regulations need to be applied based on risk, and considered technology-neutral in design. Token mapping is the foundational work to achieve this risk-based objective.”

Conversely, detractors of the announcement included Jonathon Miller, Managing Director of Kraken Australia, who stated that imposing overly strict regulation upon the industry could stifle innovation and restrict user access to digital currencies.

Over the next few months, it will be valuable to observe how the Australian Government will classify crypto-assets, and what impact these classifications will have upon their price and their ability to be utilised in Australia.

American Crypto ATM Operator Bitcoin Depot to List on NASDAQ

On 25 August, it was announced that crypto-asset ATM operator Bitcoin Depot has intentions to go public with a listing on the NASDAQ by merging with special purpose acquisition company (SPAC) GSR II Meteora. The listing is expected to finalise by the end of Q1 2023. It is estimated that the combined company will have an estimated equity value of USD $885 million following the completion of the transaction.

Bitcoin Depot operates crypto-asset ATMs across the United States and Canada. Bitcoin Depot owns over 7,000 crypto-asset ATMs across this region, which comprises approximately 19.1% of the global market share of crypto-asset ATMs. Bitcoin Depot’s crypto-asset ATMs allow users to purchase cryptocurrencies directly with debit or credit cards, and wire them to a wallet without the need for a third-party cryptocurrency exchange. In particular, Bitcoin Depot allows users to convert cash into Bitcoin, Ethereum and Litecoin.

Upon completion of the merger, the combined entity of Bitcoin Depot and GSR II Meteora will be renamed Bitcoin Depot Inc., and trade on the NASDAQ under the ticker symbol “BTM”.

The merger was unanimously approved by the leadership team of Bitcoin Depot and board of directors of GSR II Meteora. Gus Garcia, former head of SPAC M&A at Bank of America, voiced his confidence in Bitcoin Depot’s future, as he stated, “With its significant BTM footprint, key strategic relationships, and feature-rich mobile app, we believe Bitcoin Depot is well positioned to take advantage of the highly fragmented BTM market both domestically and overseas.”

It will be interesting to observe any developments in Bitcoin Depot’s upcoming listing, and how competing crypto-asset ATM providers react to the news.

The content, presentations and discussion topics covered in this material are intended for licensed financial advisers and institutional clients only and are not intended for use by retail clients. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented. Except for any liability which cannot be excluded, Monochrome, its directors, officers, employees and agents disclaim all liability for any error or inaccuracy in this material or any loss or damage suffered by any person as a consequence of relying upon it. Monochrome advises that the views expressed in this material are not necessarily those of Monochrome or of any organisation Monochrome is associated with. Monochrome does not purport to provide legal or other expert advice in this material and if any such advice is required, you should obtain the services of a suitably qualified professional.

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