Last month, Australian Treasurer Josh Frydenberg laid out plans moving forward for the cryptocurrency space in a speech to the Australian-Israel Chamber of Commerce. His plans include a regulatory framework for the use of digital assets and how it would work as a method of payment. Additionally, he noted that the country’s payment system is something of an extension of its sovereignty, with digital assets being an opportunity.
“Australia isn’t one of the first countries you think of when you think of digital assets, but the comments from Frydenberg are definitely encouraging. Especially that the government should start to build a licensing framework for exchanges and custody providers. What this industry desperately needs is to begin looking at the flaws currently found within the custody space,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.
“In terms of licensing, it is hard because digital assets are so new, so there really isn’t a tried and true method of what licensing should look like. This is an opportunity for government to work with the industry and build regs that make sense rather than driving innovation away,” noted Gardner. “Frydenberg seems to be striking that conciliatory tone, so it could be a real positive.”
For his part, Frydenberg said within his speech:
For consumers, these changes will establish a regulatory framework to underpin their growing use of crypto assets and clarify the treatment of new payment methods… Australia has an opportunity to be among the leading countries in the world in leveraging this new technology.
“I think the most interesting part of what’s coming out of Australia is that they are looking at exchanges and custody. Instituting exchange compliance without custody compliance just doesn’t make sense, and there is much left to be desired from our custody firms,” Gardner noted.
Fireblocks, which is among the best known custody providers, found itself embroiled in a lawsuit with StakeHound, which alleges the custody company lost roughly $70MM of Ethereum, after the key vanished. As a result, StakeHound could not access over 38,000 ETH.
“Regulators are slow to the draw here, and many are still having a hard time figuring out what to do with exchanges. You don’t want to regulate it to starvation, as we’re seeing in Japan. But, there needs to be a commonsense rulebook which we can all follow. Custody is the elephant in the room that most aren’t even considering yet,” said Gardner.
Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.
“Many still think of custody as similar to custody in traditional assets. Custody in crypto is just so much more complex. There are bad actors, such as hackers, to consider. How do we guard billions of dollars’ worth of assets from malfeasance and incompetence? There’s a lot to such a task, and I’m not sure that any of the companies currently in the space are up to the challenge,” said Gardner.
