Hi, This is Qadir A.K, Crypto lover, and Research Columnist.
Welcome to my new learning Series of 2020 –“ The Cryptocurrency Breakthrough: Synopsis 1 “
Cryptocurrency and blockchain in Australia are considered as Powerful and legal assets. Several legislative developments have been made recently(2020) followed by the official adaptations by The Government and Other financial regulators since 2013.
I’ve been following Latest Updates on this lately.
- The Australian Security Exchange (ASX) has delayed its transition to blockchain due to the global impact of COVID – 19 pandemic.
- The Australian National University (ANU)’s law school partners with Ripple’s Blockchain research Initiative to roll out two new courses in its Master Program next year exploring the impact of blockchain in the legal field.
- The country’s authorities are all set to issue reminders to crypto holders to pay their taxes.
- According to a survey by Reserve Bank of Australia, less than 1% of Australians used crypto for consumer payments in 2019.
In recent years there is a Sharp rise in Crypto and Blockchain users. The Australian market is a Legalised and Auditable Network, You can be candid using cryptocurrencies for business or trading on Crypto exchanges, but your profit would be taxed as well.
The Impact of this can be measured by funds raised by the home-based Initial Coin Offerings(IOC) Enosi and Haven, they raised millions of funds and continued to serve legal auditing. Australians have always adapted technology with utter Interest and a legitimate purpose for the Good.
Let me take you on a tour of the Legislative Setup of Australian Crypto Regulations!
Did you know? About 20% of Millennials in Australia have Invested and Active Cryptocurrencies users.
This Sharp rise happened when the government decided to implement Blockchain technology in sync with Cryptocurrency regulations. Added these assets into the Anti-Money Laundering Act.
The Government is Cool with it!
The Australian government is after Blockchain Technology from 2013 and the authorities are working on updates since then. Making it Simple, they just don’t consider it as ‘money’ or ‘digital money’ and so the profits earned are taxed referring to this money ( income).
I found some lines by The governor of the Reserve Bank of Australia(RBA) Philip Lowe, on change in payment model :
“When thought of purely as a payment instrument, it seems more likely to be attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions.”
“So the current fascination with these currencies feels more like a speculative mania than it has to do with their use as an efficient and convenient form of electronic payment,”
He also said that the government has no plans to introduce ‘eAUD’ replacing fiat money. The government has not intervened in the crypto industry too deeply as China or South Korea did but has imposed the appropriate regulations on the cryptocurrencies.
The government has also been widely supportive of the new technologies in the blockchain and cryptocurrency space. In 2018, the Digital Transformation Agency had to examine all the possible government services that could be bought under blockchain applications.
Australian Cryptocurrency Regulations
Australia’s primary corporate, markets, consumer credit and financial service regulator, the Australian Service and Investment Commission (ASIC) does not regulate ICO’s but digital assets are regulated as ‘financial products or services’. There are specific regulations related to blockchain or other distributed ledger technology(DLT) either.
“ Till March 2020 Australia has Registered 312 Crypto exchanges with Legal regulators “
However, ASIC released an information sheet in March 2017 mentioning the appropriate steps to be taken to regulate issues that may arise after the implementation of blockchain technology and DLT. The ASIC also updated new guidelines to this sheet in May 2019 ( Read it in the Series of events section below ).
While the current regulations would be sufficient to handle the DLT, more rigid reforms may be required in the future as the technology matures.
On the Go, The sale of cryptocurrency through ICO is regulated in Australia, the Criteria to Particp run an ICO is as follows :
- Licensing- Any entities carrying a financial business must hold an Australian Financial Service Licence(AFSL).
- Marketing- As per the ASIC, any ICO can do marketing of any offers but it must be accompanied by a related regulation document.
- Cross-border Issues – Any foreign companies who wish to carry out the crypto business in Australia need to establish its local presence. The company should register itself with ASIC and create a local branch.
- Consumer Laws – No matter ICO’s are not regulated under the Corporation Act, but they are regulated under the Australian Consumer Law, Competition and Consumer Act 2010(ACT). ACT prohibits misleading and deceptive content used under marketing. The ICO promotional material should ensure the buyers are not misled with any false information and the coins issued should fit their purpose.
Taxation and Mining – All Good
Taxation – I Suggest Reading it Carefully!
The taxation of cryptocurrency has been an area of debate, despite repeated attempts by the Australian Taxation Office(ATO) to clarify it. The ATO considers cryptocurrencies as an asset held or traded, instead of a currency. You can read more about Tax Treatment for Crypto in Australia
In a very Recent News, I learned that ‘These taxation regulations are likely to be violated and thus the Australian Tax Office ( ATO ) warns the Traders and sent official notices to do the Auditing Cryptocurrency transactions of the previous financial year.
It’s Interesting to know, How does this Tax apply for Investors and Holders?
The tax implications on the investors and holders depend on the intended use of cryptocurrencies. Investors in the business of trading cryptocurrency are subjected to the trading stock provisions. The gains on the sale of cryptocurrencies are treated as revenue and are taxable under CGT. The loss also is deductible on a similar basis.
Issuers of Cryptocurrency
An ICO which is a coin issued by an entity either by an Australian Tax resident or acting through an ‘Australian Permanent Establishment’ are likely to be taxable in Australia. The current corporate tax rate is either 27.5% or 30%. If the issued coins are considered as equity for Tax purpose, then ICO proceeds should not be taxable to the issuers. But all the future returns will be treated as dividends.
Australian Goods and Service Tax(GST)
With effect from 01 July 2017, suppliers of digital currency are not required to charge GST nor the purchaser is entitled to any GST refunds. The digital currency, if used as a mode of payment alternative to money, normal rules of GST, would be applied for the payment and receipt of digital currency.
The digital Currency in the GST legislation requires the following characteristics,
- It should be fungible so that it can be used as a payment mode for any purchase.
- It is available for the public without any restrictions.
- It should not be denominated by any country’s currency.
- The value of the digital currency should not be derived from or dependent on anything else.
- It does not give any right or privileges to receive something else.
The ATO has created a special task force to tackle the cryptocurrency evasion. The ATO collects bulk records of the cryptocurrency holders from the respected providers. They conduct data matching to ensure that the users pay the right amount of tax.
Do you know? Cryptocurrency mining is legal in Australia as long as you use your own resources such as electricity and processing power.
But the ATO doesn’t seem to be convinced with this freedom of Crypto miners or Australian business owners. The ATO Introduced lines that add taxation to the cryptocurrency mining activities as well.
Income derived by carrying out cryptocurrency mining as a business should be included under assessable income. Crypto miners would also be subjected to tax on any gains or profits derived from transferring mined cryptocurrency to third parties. Cryptocurrency cloud-based mining activities in Australia should consider the cybersecurity-related issues too.
Laws for Cryptocurrency Activities
The government passed the Anti-Money Laundering/ Counter-Terrorism Financing Act in 2017(AML-CTF) to bring the cryptocurrencies and tokens under the regulatory framework. The Digital Currency Exchanges(DCE) are required to register with the Australian Transaction Reports and Analysis Centre(AUSTRAC). Failing to register, a penalty of two years imprisonment and a fine of A$ 105,000 or both would be imposed.
The registered exchanges are required to carry out the Know-your-customer process to monitor and report suspicious transactions. Exchange operators are also required to maintain the customer’s data for a period of seven years.
Series of Events
28-02-2020:- A court in Australia has accepted to use a cryptocurrency exchange account as a security for potential legal expenses. The judge acknowledged the volatile nature of digital assets and concluded that cryptocurrencies are a form of investment in certain financial times.
10-10-2019:- Australia’s Perth Mint, one of the world’s largest refineries launched a gold-backed Ethereum coin guaranteed by the government of Australia. Ethereum blockchain technology was used to digitize government gold.
28-08-2019:- An Australian IT security consultant, Craig Wright, who claimed to Satoshi Nakamoto, the creator of Bitcoin, had to hand over half of his bitcoin holdings. He was sued by the estate of David Kleiman, a programmer who died in 2013. Kleiman estate alleged that Wright and Kleiman were partners from 2009 to 2013 and hence his family is entitled half of the bitcoin mined by both together.
31-05-2019:- ASIC issued updated guidance on ICO’s and crypto-assets which would be termed as ‘financial products’.All the FAQ’s related to ICO’s or crypto-assets were addressed. The guidance also included information about licenses for the crypto-assets participants applicable under Australian law.
08-03-2019:- AUSTRAC suspended two crypto exchanges after the companies were being used for drug trafficking. This was the first suspension after the AUSTRAC was given the responsibility of the authenticity of the exchanges since April 2018.
18-02-2019:- Australia’s Digital Transformation Agency(DTA) warned the government of the limitations of blockchain technology. The DTA team which worked to determine the stability of the blockchain technology discovered some gaps when used as a trail on some projects compared to other technologies. Hence DTA suggested to halt the experiments on these technologies and focus on the real-world applications that are available for immediate use.
07-09-2018:- The Australian Securities and Investment Commission(ASIC) released its corporate plan for 2018-2022 which provided a framework for cryptocurrencies.
26-03-2018:- The Australian Taxation Office(ATO) conducted a survey to get public feedback on the new taxation laws implemented on cryptocurrencies. They wanted to know the impact on the taxpayers with the real-time issues faced by them and convey it to the government.
25-01-2018:– Brisbane Airport is all set to become a cryptocurrency airport terminal. The airport is working with the local authority and international companies to make the entire airport including stores, coffee shops Bitcoin-friendly by accepting them.
07-12-2017:- The Australian Government passed the amendments to the Anti-Money Laundering and Counter-Terrorism Act 2006. In the new law, the digital exchanges are required to maintain the know-your-customer procedure and monitor & report suspicious transactions to AUSTRAC.
18-10-2017:- Australia approved to remove the double taxation on digital currency. The new legislation under the budget 2017-18 ensured digit asset holders will no longer pay Goods and Service Tax(GST).
07-08-2017:- Australian Senators from both the political parties announced that the Reserve Bank of Australia should recognize cryptocurrencies as official forms of currency. The Tax office hence stopped treating the digital assets as intangible property subjected to GST.
20-03-2017:- Australian Securities and Investment regulator ASIC released guidance on the use of distributed ledger technology including blockchain technology in financial services and markets. This included an assessment of the technology and risk management standards.
01-04-2016:- The Australian Attorney General released a document stating that the government is willing to draft the legislative proposals to regulate digital assets by mid of 2017. The goal of the government would be to bring the cryptocurrencies under the law against money laundering.
31-05-2016:- Australian police authority seized bitcoin worth $13 Million which was auctioned later. The police confiscated the bitcoins as proceedings of crime. It was the second such Bitcoin auction after the US Marshals service sold 144,000 Bitcoins seized from an online drug bazaar silk road.
August 2015:- The Australian Parliament’s Senate Economic reference committee published a report title, ‘Digital Currency – Game Changer or Bit Player’. It emphasized the development of an effective regulatory system for digital currency, the potential impact of the technology on the economy and the possible advantages that could be utilized. A delegation also traveled to Canada and Singapore to discuss matters related to digital currencies with the government officials.
30-03-2015:- The Australian Treasury issued a whitepaper with respect to cryptocurrencies such as Bitcoin. It elaborated on the challenges that could be faced to regulate them under tax laws and that the companies that deal with digital currencies may reallocate profits to minimize taxes.
20-08-2014:- The Australian Taxation Office(ATO) issued guidance on tax treatment for digital currencies. The ATO concluded that cryptocurrencies are neither money nor foreign currencies but can be considered as an asset for capital gains.
09-06-2014:- The governor of Bank of Australia, Glenn Stevens stated that digital currencies can pose regulatory questions. He further told that those investors who are ready to take up risks within the guesswork of the digital currencies should be allowed to do so.
24-06-2013:- Australian Taxation Office (ATO) confirms Bitcoin transactions are subjected to Goods and Service Tax(GST) as well as Income tax. Also told that bitcoin is expected to be a means of electronic payment or money.
Blockchain Companies in Australia
Below are some of the better exchanges where users can trust to invest in cryptocurrency.
- DigitalX:- It is a Perth-based blockchain company which was listed on the Australian Security Exchange in June 2014. It is a global digital payment company, primarily aims to develop fintech products and services in the mobile bill payments and remittance space.
- Power Ledger:- It is a WA blockchain start-up that enables peer-to-peer electricity sharing. The company has begun with an initial ICO of $34 Million.
- Data61:- The team at Data61 had been investigating the ways of adopting the blockchain technology to get good productive benefits that could amplify the economy.
- ANZ and Westpac:- ANZ & Westpac teamed up with IBM and Shopping center operator center Group digitalize guarantee process. They then used blockchain instead of paper for bank guarantee on commercial property lease.
- Bron.tech:- It gives the user a higher level of control over how their personal data is shared by the third parties. It is a Sydney based company found in 2015 that developed a market place to collect data directly from its users.
The Conclusion Shot
At this point I can say, Australia has dealt with cryptocurrencies in a better way. Cryptocurrency could be used as fiat currency but with some restrictions. Crypto lovers might have a good market place in Australia unless they do not indulge in any illegal activities. The future scope of any technology and its incorporation within the services of government is at a good pace.
If You are a Crypto Person, I Suggest Do follow the Latest Trends and Updates on Australian Cryptocurrency Regulations and Operations by Government and Regulatory.
Please Follow my New Series of Crypto Regulations in Different regions and Share it with your friends, followers, and beginners.
Recommended Read: The Cryptocurrency Breakthrough: Synopsis 2 – UK’s Cryptocurrency Regulations