Cryptocurrency, The Blockchain and Business Brokers

Article Author: Garry Stephensen
Position: Managing Director
Read time: 6 mins

How Cryptocurrency and Blockchain are Revolutionizing Business Transactions in the Corporate Brokerage Industry in Australia

In the world of corporate brokerage, the emergence of technologies such as artificial intelligence, cryptocurrency and blockchain technology has ushered in a new era of efficiency, transparency, and security. As businesses in Australia seek innovative solutions to streamline their operations and gain a competitive edge, the adoption of cryptocurrencies and blockchain in the corporate brokerage industry is proving to be a game-changer. This is especially true of acquisitions within the Australian tech industry.

Understanding Cryptocurrency and Blockchain

Cryptocurrency, such as Bitcoin and Ethereum, is a digital or virtual form of currency that relies on cryptography for security. Blockchain, on the other hand, is the underlying technology that powers cryptocurrencies. It is a decentralized and distributed ledger that records transactions across a network of computers. The combination of these two technologies has the potential to transform the way business transactions are conducted, particularly in the corporate brokerage sector. For more information about using blockchain technology in your business, speak to our specialist melbourne business brokers today.

Cryptocurrency, The Blockchain and Business Brokers

Enhanced Security and Transparency

One of the key advantages of blockchain technology is its ability to provide a tamper-resistant and transparent record of transactions. In the corporate brokerage industry, where trust and security are paramount, blockchain can significantly reduce the risk of fraud and malfeasance. Each transaction is recorded in a block, and once validated, it becomes a permanent part of the chain. This creates an immutable and transparent ledger that can be audited at any time, ensuring accountability and instilling confidence in stakeholders.

According to a recent study by the Australian Securities and Investments Commission (ASIC), financial fraud costs businesses in Australia millions of dollars annually. The implementation of blockchain technology can help mitigate these risks by providing a secure and transparent infrastructure for transactions, reducing the likelihood of fraudulent activities.

Efficiency and Cost Reduction

Traditional corporate brokerage transactions often involve multiple intermediaries, leading to a complex and time-consuming process. Cryptocurrency transactions, powered by blockchain, enable faster and more efficient settlement processes. The elimination of intermediaries not only accelerates transaction times but also reduces associated costs.

A report by Deloitte highlights that businesses in Australia spend a significant amount on transaction-related fees and reconciliation processes. The adoption of blockchain technology can potentially lead to substantial cost savings by streamlining operations and reducing the need for intermediaries.

Cross-Border Transactions

The global nature of corporate brokerage often involves cross-border transactions, which can be hindered by the complexities of different regulatory environments and currencies. Cryptocurrencies provide a solution by offering a decentralized and borderless form of value exchange. Blockchain's ability to facilitate instant and secure cross-border transactions can greatly benefit Australian businesses engaged in international corporate brokerage.

According to the Reserve Bank of Australia (RBA), cross-border payment costs remain a challenge for businesses, with fees and delays impacting the efficiency of international transactions. Cryptocurrency transactions, being decentralized and operating 24/7, can significantly reduce the time and cost associated with cross-border transfers, enhancing the overall competitiveness of Australian businesses in the global market.

Consider the following benefits for using cryptocurrency for cross border transactions:

Reduced Transaction Costs:

Traditional cross-border transactions often involve multiple intermediaries, each charging fees for their services. These fees can accumulate, significantly impacting the overall cost of the transaction.
Cryptocurrency transactions, powered by blockchain technology, operate on a decentralized network without the need for numerous intermediaries. This reduces transaction costs by eliminating or minimizing fees associated with banks, currency exchanges, and other intermediaries.

Faster Settlements:

A common phrase used by business brokers is that "Time can kill a deal". Such is the importance of time. International transactions typically face delays due to the involvement of different financial institutions, time zone differences, and varying processing times for different currencies.
Blockchain technology enables near-instant settlements by removing the need for intermediaries. Transactions on the blockchain are verified and recorded within minutes, providing Australian businesses with quicker access to funds and reducing the time required for international sales transactions.

Expansion into New Markets:

The efficiency and cost-effectiveness of cross-border cryptocurrency transactions can encourage Australian businesses to explore and enter new international markets.
By leveraging blockchain technology, businesses can overcome barriers such as high transaction costs and complex financial infrastructure, making it easier to establish and grow their presence in diverse global markets.

Smart Contracts and Automation

Blockchain technology introduces the concept of smart contracts, self-executing contracts with the terms of the agreement directly written into code. This can be a great tool for deals broken up into consistent payments over time. In the corporate brokerage industry, this can automate various aspects of transactions, from contract execution to payment settlements. The use of smart contracts not only reduces the potential for errors but also expedites the entire process.

A survey conducted by the Australian Financial Review (AFR) found that delays and errors in contract execution and settlements were common pain points for businesses. The integration of smart contracts into corporate brokerage operations can address these issues, providing a more streamlined and error-free transaction process.

Challenges and Regulatory Landscape

While the benefits of cryptocurrency and blockchain in the corporate brokerage industry are evident, it's crucial to address the challenges and the evolving regulatory landscape. The volatile nature of cryptocurrency prices poses risks for businesses, and regulatory uncertainty can create barriers to widespread adoption. The Australian government has taken steps to regulate cryptocurrency exchanges and ensure compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) laws. A comprehensive regulatory framework is essential to foster the responsible adoption of cryptocurrencies in the corporate brokerage sector. Speak with our specialist corporate business brokers in Sydney today.

Under Prime Minister Albanese, the Aussie government has crept further towards regulating crypto to provide some safety and assurance in this sector that has historically been predominantly run by cowboys. What are they looking to achieve? In a nutshell, 2 things: Transparency and compliance with existing financial laws.

Here's an outline of how Australia is regulating or plans to regulate cryptocurrency in the near future:

Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Laws
Since early 2018 Australia has required digital currency exchanges (DCEs) to register with AUSTRAC, the Australian financial intelligence agency. Exchanges must comply with AML/CTF regulations with operate within Australia. This includes customer identification, reporting suspicious transactions, and maintaining detailed records.
Protection For Consumers
The Australian Competition and Consumer Commission (ACCC) monitors the cryptocurrency market for misleading or deceptive conduct. The ACCC in the past has taken action against fraudulent or misleading ICOs (Initial Coin Offerings) and other scams.
Licensing of Digital Service Providers
The Aussie government is considering implementing a broader licensing framework for cryptocurrency exchanges and custodians. This framework would require these entities to obtain an Australian Financial Services License (AFSL) or a similar license, ensuring that they adhere to strict operational and security standards.
Taxation
The Australian Taxation Office (ATO) has issued guidelines on the tax treatment of cryptocurrencies. Cryptocurrencies are treated as property and are subject to Capital Gains Tax (CGT). The ATO has also been ramping up efforts to track and tax cryptocurrency transactions, using data matching and other methods to identify non-compliance.
Regulation of 'so called' Stablecoins
The Australian government is considering specific regulations for "stablecoins". A "stablecoin" (which ironically do not boast a very stable track record) are cryptos that are pegged to the Australian fiat dollar. This may require the issuers to hold reserves equal to the value of the stablecoins in circulation and subjecting them to regular audits.
Custody and Security Standards
There are ongoing discussions about introducing minimum security and custody standards for entities that hold cryptocurrencies on behalf of others. This would include requirements for the safe storage of private keys and other security measures to protect against hacks and theft.
Comprehensive Regulatory Framework
The government is working towards a more comprehensive regulatory framework for all digital assets, including cryptocurrencies, tokens, and other forms of digital finance. This framework would aim to balance innovation with consumer protection, ensuring that Australia remains competitive in the global digital economy.
Collaboration with International Bodies
Australia is also collaborating with international regulatory bodies to harmonize its approach to cryptocurrency regulation with global standards. This includes participating in discussions at the Financial Action Task Force (FATF) and other international forums to develop consistent regulatory practices.
Enhanced Consumer Protections
Future regulations may include stronger consumer protections, such as ensuring that investors are fully informed of the risks associated with cryptocurrency investments and that there are mechanisms in place to address grievances.

Future Outlook and Adoption

As businesses in Australia continue to explore the potential of cryptocurrency and blockchain technology, industry experts predict a steady increase in adoption. A survey by the Australian Banking Association (ABA) indicates that a growing number of financial institutions and corporate brokerages are actively exploring blockchain solutions to enhance their operations. Moreover, major global corporations are already integrating blockchain into their systems. Companies like IBM and Microsoft are developing blockchain solutions to address the specific needs of corporate clients. This trend suggests that blockchain technology is not merely a buzzword but a transformative force that is reshaping the landscape of corporate brokerage on a global scale.

The integration of cryptocurrency and blockchain technology is revolutionizing business transactions in the corporate brokerage industry in Australia. The enhanced security, transparency, efficiency, and cost-effectiveness offered by these technologies position them as catalysts for positive change. While challenges and regulatory considerations persist, the potential benefits far outweigh the risks. As businesses navigate this transformative landscape, early adopters stand to gain a competitive advantage, positioning themselves at the forefront of innovation in the corporate brokerage sector. The future of business transactions in Australia is undeniably intertwined with the revolutionary potential of cryptocurrency and blockchain technology.