With the rise of cryptocurrencies around the world, it’s no surprise that at least 5% of Australia’s own cryptos. However, according to some analysts, that number may even be as high as 20%.
However, the crypto market is very vulnerable to threats such as scams, hacks, and even bankruptcy. There’s now been many examples of how damaging crypto scams can be. Recognizing this threat, governments around the world have begun regulating the industry in earnest. Here’s a look at how Australia has chosen to do this.
How does Australia Regulate Cryptocurrency?
A mild approach has always been used by the Australian government when it comes to crypto asset regulation. However, with the rapid changes in the crypto space, new regulations are being put in effect to focus on licensing and compliance, consumer protection, taxation, and regulatory developments.
However, the crypto market is very vulnerable to threats such as scams, hacks, and even bankruptcy. Despite these challenges, many continue to buy Bitcoin as they recognise its potential and evolving regulatory safeguards. Recognizing the risks, governments around the world have begun regulating the industry in earnest. Here’s a look at how Australia has chosen to do this.
For example, businesses that are dealing in digital assets, such as online stores and online casinos are expected to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) laws. They also have to implement processes such as Know Your Customer (KYC) to give effect to these processes.
Many online casinos that are accessible to Australians now offer cryptocurrency, like you can buy Bitcoin as a payment method. Many players are drawn to these platforms as they leverage blockchain technology to provide some unique features like anonymous play, instant withdrawals, generous bonuses, and registration processes that don’t require an ID. According to iGaming expert Nikita Jones, features like these are making these casinos massively popular among Australian players (Source:https://www.business2community.com/cryptocurrency/best-bitcoin-casinos-australia).
However, given how seamlessly cryptocurrencies can be used to provide such platforms, authorities are trying to restrict their use. For now, most Australians can still access them through offshore sites, with many believing they shouldn’t be regulated at all.
Instead, the Australian Securities and Investments Commission (ASIC) is one of Australia’s primary financial services regulators for markets and corporations. Under the ASIC, crypto assets are recognised as part of the exchange-traded products (ETPs). Under Australian law, cryptocurrencies are still recognised under existing regulatory frameworks.
Crypto Exchanges
Cryptocurrency exchanges need to be registered with the Australian Transaction and Reports and Analysis Centre (AUSTRAC), which verifies and identifies crypto users. The centre also regulates whether individual exchanges are compliant with government reporting obligations and maintains records for them.
Crypto Investment
In Australia, cryptocurrencies are regulated based on their transactional qualities, such as the exchanging and issuing process. Although Bitcoin is seen as a legal tender, the government still recognises cryptos as investment assets rather than a type of money or foreign currency.
Central Bank Digital Currency
The Australian government also has its own digital currency that is managed by the Reserve Bank and does recognise this one digital currency as a form of money. Used via smart cards and smartphone wallets, the Central Bank Digital Currency (CBDC) is issued by the bank and intended for retail use.
However, the Reserve Bank of Australia favours its own currency but has adopted a cautious approach with cryptocurrencies being used for retail purposes. The reason for this is that the country already provides businesses and retailers with a variety of electronic payment systems that are convenient, safe, and low-cost.
The belief is that cryptocurrency payments will saturate the system with too many unknowns and lead to problems like scams, fraud, and a lot of confusion.
DLT and Blockchain
There is no specific legislation applied to distributed ledger technologies (DLT) and blockchain in Australia. ASIC is responsible for making public guidelines regarding potential issues that may arise with the implementation of digital currencies. Companies that are operating within distributed ledger technologies, cryptocurrencies, and blockchain are subject to the obligations and general guidelines set out by ASICS.
Taxes on Crypto in Australia
The authority that regulates the crypto tax in Australia is the Australian Taxation Office. They consider crypto to be an asset which means they are taxed as property and are subject to capital gains tax. However, if cryptocurrency is held for at least 1 year (12 months) before it is sold, the tax on capital gains may be discounted.
The Australian Taxation Office strictly regulates how crypto owners pay their taxes and plays an active role in ensuring holders do not seek to avoid these obligations. As a result, crypto owners are required to provide detailed records of all their holdings and the exchanges they are registered on to ensure they remain tax-compliant.
The sale and exchange of cryptocurrencies as well as other digital assets are regulated by the financial services legal regime in Australia. This stipulates that if the exchange or sale of any crypto takes an ordinary course, the crypto is regarded as trading stock. This means that any gains from a sale of crypto whether mining or trading will be quantifiable. If you have any losses, these are considered deductible.
Staking crypto is treated as ordinary income if you are rewarded with crypto tokens which are taxable. Input-tax sales are regarded as goods and services that do not fall under the category of Goods and Services Tax (GST).
However, since crypto can be used as a payment method to pay for goods and services, GST is applied. People who operate cryptocurrency mining businesses are required to register if their business has an annual turnover of $75,000 AUS or more. In such cases, they are treated as GST and they can be claimed from the Australian Taxation Office for input tax credits.
Conclusion
Since August 2022, the government has taken the necessary steps to set up a regulatory framework for the cryptocurrency sector. As early as 2023, the government introduced regulations for exchanges and custody arrangements to ensure that customers’ funds are safeguarded.
By constantly updating and reviewing its regulatory approach with the evolving world of crypto, the Australian government is finding ways to balance financial stability within the cryptocurrency space with the safety of crypto holders.
