Are you up to speed on cryptocurrency regulations in Australia? Learn the ins and outs and keep your investments safe.
Cryptocurrency trading in Australia is booming — from media reports to podcasts to dedicated Facebook (NASDAQ:FB) groups, the Australian appetite for crypto investing is growing.
For many investors and speculators, part of the appeal of cryptocurrencies such as bitcoin is their decentralised nature. But what does this mean from a regulatory perspective?
Read on to learn about cryptocurrency regulations in Australia and how to work within them.
Are cryptocurrencies legal in Australia?
Cryptocurrencies have been legal in Australia since 2017, making them subject to 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?
Cryptocurrency exchanges are also legal in Australia, although they 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.
The challenge for investors is that the ASX and Australian Securities and Investments Commission have been reluctant to allow exchange-traded funds linked to bitcoin to be listed. An impending parliamentary enquiry will be looking at how to best regulate cryptocurrencies.
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.
Lack of regulation driving customers overseas
This lack of regulation in Australia is leading savvy Aussie investors to engage in international crypto trading, often in far riskier investments with little to no protection.
Experts firmly believe that Australia needs to follow in the footsteps of nations like Singapore, Hong Kong, Europe and the US, all of which have successfully regulated digital financial products.
Caroline Bowler, chief executive of BTC Markets, an Australian bitcoin exchange, said in March 2021 that Australia needs to keep up with the rapid change and growth in digital currency.
“But we need to use this clear advantage to get on the front foot to prepare our economy for what is to come,” she explained. “Australia needs to prepare for the future of finance. We believe prioritising digital financial legislation will have a significant longer-term impact across our entire economy.”
What regulations must ICOs 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.
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.
Cryptocurrency and crypto investing aren’t going anywhere — and as well-known financial journalist Alan Kohler has said, Australia’s slow movement and unwillingness to catch up could cost the country big.
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Securities Disclosure: I, Ronelle Richards, hold no direct investment interest in any company mentioned in this article.