Cryptocurrency Regulations in Australia

Are cryptocurrencies legal in Australia?

Cryptocurrencies have been legal in Australia since 2017, and they fall under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

The government has specified that Bitcoin in particular is to be treated as property, meaning it is subject to the country's capital gains tax (like other investments, including shares, managed funds and property).

Cryptocurrencies that share the characteristics of Bitcoin are also to be treated as property. This is thought to be a fairly progressive regulatory approach to digital currency investing.

What regulations do cryptocurrencies and cryptocurrency exchanges have to follow in Australia?

The Australian government has been looking into cryptocurrency regulations for the last few years. It completed a parliamentary inquiry on the topic, and the final report, which came out in October 2021, includes a series of recommendations on how to regulate cryptocurrencies and other tokens, such as ensuring that taxation is possible and preventing de-banking and money laundering. Additional suggestions are geared at protecting current and prospective crypto owners.

While this guidance hasn't been made law yet, in March of this year, Senator Andrew Bragg introduced the Digital Assets (Market Regulation) Bill 2023, a private bill with the goal of setting standards for the Australian cryptocurrency market by putting two of the 12 regulations into law.

In the meantime, Australia’s government does not seem to have an interest in leaving cryptocurrencies as a new maverick economy, nor does it want to stifle progress and the will of its people. A previous challenge for investors was reluctance from the ASX and Australian Securities and Investments Commission to allow exchange-traded funds (ETFs) linked to Bitcoin to be listed. However, as of 2022, investors now have access to Bitcoin ETFs.

In order to be legal in Australia, cryptocurrency exchanges must register with the Australia Transaction Reports and Analysis Centre, better known as AUSTRAC. AUSTRAC is the government's financial intelligence agency, and its goal is to identify issues like money laundering and tax evasion.

It is against the law to provide digital currency exchange services in Australia without registering, which ensures exchange customers are trading in compliant marketplaces.

There is currently no specific legislation dealing with blockchain or other distributed ledger technology. There have been calls from the sector for regulation to help with the serious and ongoing issue of de-banking, which happens when traditional banks suspend the accounts of digital currency businesses.

What regulations do ICOs have to follow in Australia?

Initial coin offerings (ICOs) are considered speculative investments in Australia. ICOs are the crypto market's equivalent to an initial public offering, and involve the creation of a new coin, app or other service to raise funds. They can provide major returns, but can be quite risky.

For example, in Australia ICOs unfortunately don't usually offer any legal rights or protections. It's important to know that under Australian law an ICO is considered separate from crowd-sourced funding, which does offer basic investor protections.

If a business is offering digital tokens or crypto assets that could fall under the definition of a financial product, then Australian law applies — including the law to hold an Australian Financial Services licence.

What's the future of cryptocurrency regulations in Australia?

While Australia has made some strides in its cryptocurrency regulations, the country has room to improve in key areas. And many market participants hope it won't wait too long to do so.

Fortunately for investors, steps to regulation are moving ahead of deadlines. In August 2022, Australia took stock of the cryptocurrencies in its economy, becoming the first country to do so. The move was seen as an initial step in regulating cryptocurrencies.

More recently, the Australian Treasury released its Token Mapping Consultation Paper in February of this year. The plan is for the Treasury to release a separate proposed licensing and custody framework for crypto asset service providers based on responses from stakeholders; that should happen in mid-2023.