Despite global interest in cryptocurrency, Australia has seen the closure of several blockchain and crypto startups, amid the overall decline of fintech innovation in the country.
The KPMG Pulse of Fintech report highlights a significant contraction in Australia’s fintech landscape, particularly in the crypto and blockchain sectors. More than 7% of Australian fintech startups closed in 2024, with crypto and blockchain constituting about 14% of the firms that discontinued their operations.
The number of independent fintech firms in Australia has declined from 827 firms in 2022 to 767 across all business verticals as of December 2024. Among them, only 74 active firms are dealing with cryptocurrencies and blockchain technology. About 4.5% of the 60 firms ceased operations, while 3% shut down due to mergers and acquisitions (M&A).
Some of the main reasons for the fintech sector contraction in Australia are regulatory challenges and decreased venture capital funding. Blockchain-related ventures have faced a steeper downturn than other types of fintech businesses, often considered more risky as they deal with volatile crypto markets. The KPMG report also attributed the decline in blockchain and crypto firms to the growing investor interest in artificial intelligence which takes up a larger share of global funding each year.
While other regions have seen crypto adoption grow, Australia’s regulatory environment appears to lag, creating barriers to fostering a thriving local crypto ecosystem.
In 2023, Australian regulators introduced a few laws to address the growing crypto trading sector. First, the Australian Treasury released a “Token Mapping” paper, in an effort to classify cryptocurrencies and other digital assets within four categories for further regulation. Next, the Australian Taxation Office launched a new data-matching tool to monitor crypto transactions and ensure tax law compliance when it comes to digital assets. However, the sector still remains largely unregulated.
In June 2024, ahead of the Australian Stock Exchange’s (ASX) first Bitcoin exchange-traded fund (ETF) launch, the Australian Securities and Investments Commission (ASIC) issued a warning to all prospective investors, reminding them “that crypto is risky, inherently volatile and complex.”
This December, the Australian Securities and Investments Commission (ASIC) released a consultation paper proposing a comprehensive financial licensing framework for most cryptocurrency firms operating in Australia. Meanwhile, the Australian Transaction Reports and Analysis Centre (AUSTRAC) promised to focus on the crypto industry next year, as an attractive avenue for money laundering.
Despite such a cautious regulatory approach, a recent report showed a 400% growth of crypto assets share in “self-managed super funds” used by Australians as a means to secure their retirement life. In late 2023, nearly 612,000 self-managed super funds (SMSFs) were holding a total of $658.6 million (992 million Australian dollars) worth of cryptocurrencies.
