All innovations bring with a sense of excitement and sometimes uncertainty.
Cryptocurrency is no different and although most Australians are now familiar with the digital currency, many would not be unsure about how it’s regulated.
Is it legal?
Cryptocurrencies were declared legal by the Reserve Bank of Australia in 2017.
This means crypto such as Bitcoin, Ethereum, Ripple and Dogecoin are all legal.
How is it regulated?
In 2018, Australia’s financial intelligence agency the Australian Transaction Reports and Analysis Centre (AUSTRAC) introduced new laws to prevent criminal activity in the world of crypto.
Under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, digital currency exchanges must register with AUSTRAC and meet anti-money laundering and counter-terrorism financing compliance and reporting obligations.
This means crypto exchanges must collect information about their customers’ identity as part of Know Your Customer (KYC) processes.
They need to monitor transactional activity and report any suspicious activity or large transactions of cash over $10,000.
AUSTRAC has 400 digital currency exchanges registered and has cancelled six registrations in the past year.
Crypto is legal in most developed countries outside of Australia, however it is restricted or illegal in some countries such as China, Russia, Vietnam, Indonesia, Turkey and Bolivia.
How is it taxed?
Cryptocurrency became subject to tax in Australia in 2017.
It is subject to capital gains tax (CGT) when you dispose of your cryptocurrency either through selling, gifting, trading or exchanging, converting to fiat currency such as AUD or using it to purchase goods or services.
Crypto regulation is still evolving and to a certain degree, depends on operators complying with Australia’s laws.
The Australian Securities and Investments Commission (ASIC) warns consumers who use unlicensed platforms to trade crypto are at risk of making heavy losses.
Further regulation is likely with a Senate committee investigating possible policy and legal approaches Australia may take based on models in Canada, Singapore, the United Kingdom and the European Union.
The committee, chaired by NSW Liberal Senator Andrew Bragg, has held two public hearings with submissions from market Revolut Australia and Bitaroo provided evidence, academics from Monash University, ANU and RMIT, as well as regulators ASIC and AUSTRAC.
To learn more about cryptocurrency and tax in Australia visit Swyftx Guide to Cryptocurrency Tax in Australia.