An overview of the cryptocurrency regulations in Australia
According to Roy Morgan’s experimental institution, more than 1 million Australians – 5% of the state’s residents – possess cryptocurrency.
Certain studies also expand the statistics up to 20% of Australians possessing cryptocurrencies. Undoubtedly, the number of people in the industry of the state does not stop increasing.
But, obviously according to the whole, only 20% of owners of cryptocurrencies understand the dangers associated with investing in numerical assets.
Cryptocurrency exchange has always been sensitive with the purpose of hacks, scams, tearing out the city or ruin, in consequence of which traders lost a share or all without exception their resources.
The actions of 2022 revealed that even the most widespread and solid platforms, such as FTX or Celsius, or crypto investment firms, such as Three Arrows Capital (3AC), are dangerous to use and also have a chance to fall, taking over their customers.
The dramatic 2022 plan has forced governments as well as stabilizing digital asset trading apparatuses all over the world to implement measures to improve legislation to protect buyers, and Kangaroo Country is guided by this situation, looking at the chance of adopting the hardest edges.
Is cryptocurrency legal in Australia?
Bitcoin and other cryptocurrencies are considered legitimate in Australia and are treated as property.
Trading, spending, buying, and storing cryptocurrencies is legitimate, they are considered a recognized means of payment for individual and business activities, even though merchants are not required to carry them out.
Blockchain as well as cryptocurrencies in Australia have constantly been used as intermediate as well as strong bazaar incentives, encouraging scientific and technological innovations in payments, cryptoassets, lending, investments as well and custodial services.
Cryptocurrencies as well as cryptocurrency exchanges became legal in 2017. Together with such times, Australian law has never been particularly involved in the formation of the sphere and also congratulated the novelties accompanying this technological process.
But in 2018, the Australian cryptocurrency law covered the activities according to the war against money laundering (AML) and terrorist financing (CTF), as the price transfer in digital currencies contains transactions that have all chances to facilitate this kind of illegal work.
As a result, the Payment Decree of 2006 started to include numerical currencies in the order of AML and CTF.
How is cryptocurrency regulated in Australia?
The Australian government has historically maintained a gentle approach to the regulation of cryptoassets.
But in the world of past tragic incidents in the cryptocurrency space, slogans to explore the most successful regulation of digital currency units, aimed at the protection of buyers and the unity of trade.
Even though cryptocurrencies in no way look like a regional jurisdiction as well as a single area of authority, they all without exception have every chance to be included in the available regulatory framework under Australian law.
Australia’s regulatory stance on blockchain and cryptocurrency
The Australian Securities and Investments Commission (ASIC) is the main regulator of economic services in Australia in the field of collective sharing, bazaars, and consumer lending.
The ASIC has more precisely defined that crypto-assets are considered a component of exchange-traded products (ETP) – significant securities with a constant value, which are traded during the day in the state stock exchange – as well as other investment goods.
Crypto as an investment
Since cryptocurrencies look like investments, in Australia they, as well as the principle, are present near the study of interest together with the place of transactional relationships, such as the course of issuance and exchange.
In the Australian legislation, the main interest is given to the work associated with cryptocurrencies, and not personal cryptocurrency assets.
Despite in such a case that in El Salvador bitcoin was established as a legitimate payment resource, the Australian government proved that it will continue to analyze bitcoin and other cryptocurrencies as an investment asset, and not as a foreign currency or each type of funds.
Just like investments, cryptocurrencies are subject to the CGT – a tax on the income acquired in the presence of the realization of the asset – which means that traders and traders are obliged to follow all procedures in detail to determine whether a unit is subject to CGT.
Cryptocurrency exchanges in Australia must register with AUSTRAC, recognize and control their users, perform counting, and also fulfill municipal promises according to AML/CFT reporting.
The State Register of Digital Money Exchanges is conducted and protected by AUSTRAC, and unregistered exchanges have all chances to face criminal prosecution and economic fines in case of non-compliance with the registration conditions.
Blockchain and DLT
At present in Australia, there is no specific legislation about blockchain or other distributed ledger technology (DLT). ASIC provides available guidance on the potential difficulties that may arise with the introduction of such technologies.
Companies that operate their bazaar infrastructure and provide economic services or consumer credit services using DLTs are subject to regulatory actions available under the relevant licensing procedures.
Firms operating within the framework of cryptocurrency, blockchain, and DLT technologies are required to adhere to uniform principles and direct obligations.
Such constructs as well as direct responsibilities are combined, in particular, with the planning of coordination competence, the provision of appropriate scientific and technical resources as well as risk management.
One of the main distinguishing features of certain cryptocurrency grids is the implementation of smart contracts, also referred to as self-executing contracts.
The kangaroo country admits the legality of smart contracts together with the lawyer’s point of view in the presence of the circumstance that they meet absolutely all the conditions and obligations of a classic lawyer’s agreement.
Central bank digital currency
Despite global attention to the development of centralized bank digital currencies (CBDCs), the Reserve Bank of Australia, the country’s central bank, has not disclosed any immediate plans to issue such a centralized digital currency.
The government recognizes that CBDC is potentially a new form of digital money to be administered by the central bank, and a digital version of cash widely accepted through smartphone wallets or smart cards.
However, the Reserve Bank of Australia assumes that there is currently no compelling policy rationale, and takes a more skeptical approach to the real-world option of retail CBDC, a central bank digital obligation offered to the public for retail payments.
The main reason for this stance is that Australia already has an effective electronic payment system that provides retailers and businesses with a wide range of secure, convenient, and low-cost payment services.
Do you pay tax on cryptocurrency in Australia?
The Australian Taxation Office (ATO) is the authority that regulates the taxation of cryptocurrencies in Australia and treats cryptocurrency as an asset.
More specifically, crypto assets are considered assets for tax purposes and are subject to capital gains tax. If the cryptocurrency is held for at least 12 months before it is sold, capital gains tax can be reduced.
Sale and exchange of cryptocurrency
Australia’s existing financial services regulatory regime regulates the sale or exchange of cryptocurrencies and other digital assets.
If the sale or exchange of cryptocurrency is a normal process of the holder’s trading activity, the digital asset will be treated in the same way as trading shares.
Gains from the sale of cryptocurrency – for example, as part of a trading or mining business – will be quantifiable and losses will be deductible.
Betting cryptocurrency and receiving remuneration in the form of crypto-tokens are activities that are treated as ordinary income and will be taxable.
Goods and Services Tax (GST)
From July 2017, supplies and purchases of digital currency are not subject to GST if they are financial supplies subject to input tax.
Sales subject to input tax are goods and services whose price does not include GST, and no credit can be claimed for GST included in the price of ‘inputs’.
However, since digital currency can act as a method of payment, the normal GST rules apply to the payment or receipt of digital currency for goods and services.
A cryptocurrency miner is required to register for GST if the annual turnover of his business is $75,000.
However, a miner who has not reached this GST threshold may still wish to register for GST to claim full input tax credit from the ATO on the GST cost of his acquisitions.
Enforcement against cryptocurrency tax evasion
The ATO intends to crack down on cryptocurrency tax evasion and has established a special task force for this purpose.
The ATO requires Australian cryptocurrency exchanges and service providers to maintain and provide customer records.
The aim is to reconcile the data and ensure that cryptocurrency traders and investors are paying the correct amount of tax.
Forward-looking plans for the regulation of digital assets in Australia
In August 2022, the Australian government announced that it would take all necessary steps to launch a series of consultations with industry participants, investors, and stakeholders to begin developing a regulatory framework for the cryptocurrency sector.
In regulating the crypto industry, Australia will have to face the challenges of being a relatively new market, understanding it, and setting crypto restrictions without stifling innovation.
Here are the main areas of focus for regulators:
- Treasury is expected to prioritize token mapping work to provide regulators with tools to determine the appropriate characteristics and regulated status of crypto assets, as crypto-tokens and NFTs have a wide and diverse range of uses.
Authorities will need to identify significant regulatory gaps, assess licensing progress, define crypto asset custody obligations for third-party custodians, and develop additional consumer protection guidance.
- The Australian government intends to introduce custodian and exchange regulations to protect customers in situations like the FTX crypto exchange crash, which resulted in platform users losing funds. ASIC also expects to introduce good practices around how asset holders should hold their crypto assets and ensure that adequate risk management systems are in place.
- The government promises to introduce regulation of exchanges and depository arrangements as early as 2023 to show the relevance of protecting customer funds. Specifically, the legislation will require registered exchanges to implement Know Your Customer (KYC) processes to identify and verify customers, comply with annual reporting obligations, and monitor and report large suspicious transactions.