‘Wild West’ of Crypto Readies for Tax Laws

The “wild west” of cryptocurrency is starting to gain the acceptance and understanding of lawmakers.

Robert Francis, managing director at trading platform eToro Australia, said the explicit acknowledgement of crypto in the Australian federal budget was a first, with new tax laws to be introduced to parliament.

He said the budget had provided investors and the industry with clarity on where the Australian government stands on digital asset classes in comparison to foreign currency and traditional markets.

“It shows a step forward towards crypto and blockchain technology integration in the traditional financial system,” Mr Francis told AAP on Friday.

Blockchain creates a digital ledger of transactions and is the technology that underpins the currencies.

Leigh Travers, CEO of digital currency exchange Binance Australia, said the budget’s investment of $13.5 million to fund talent-spotting for critical and emerging technologies was also a positive step.

He warned a talent shortage will hit Australia as Web 3.0, the next version of the World Wide Web takes hold.

“If we don’t act now, leveraging widespread backing from government and industry players, Australia will miss out on the multi-billion dollar opportunity,” he told AAP.

The Australian Taxation Office estimates more than one million taxpayers have traded crypto assets since 2018.

“The ATO’s advice that investors keep good records of their transactions – and subsequent profits and losses – is as relevant as ever,” Mr Francis said.

University of NSW School of Information Systems and Technology senior lecturer Eric Lim told AAP the latest federal budget signalled acceptance that cryptocurrencies were here to stay.

“There is a general impression that it’s the wild west and that many of these entities are mavericks and resisting regulation,” he said.

But the cryptocurrency industry was very welcoming of good and fair regulation, Dr Lim said.

“That’s what they want because it allows them to progress, it allows them to build with this clarity in mind and what they need to do to comply with regulations,” he said.

The budget includes new laws to clarify that bitcoin and other cryptocurrencies won’t be treated as foreign currencies for tax purposes, which will be backdated to take effect from July 1, 2021.

“This maintains the current tax treatment of digital currencies, including the capital gains tax treatment where they are held as an investment,” H&R Block spokesman Mark Chapman said.

The budget papers say the measure will remove legal uncertainty following the decision by El Salvador’s government to adopt bitcoin as legal tender.

The Reserve Bank will continue researching the viability of a central bank digital currency, which could be used for digital transactions between banks and international trading partners.

But digital currencies issued by the Australian government won’t be included in the new tax treatment.

The Treasury will continue to map digital assets, while the Australian Securities and Investments Commission looks at how to regulate them as financial products and services.