The ‘Wild West’ of crypto-clarities for tax laws

by Arthur · October 28, 2022

The “wild west” of cryptocurrency is beginning to gain acceptance and understanding among lawmakers.

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

He said the budget had given investors and the industry clarity on where the Australian government stands on digital asset classes compared to foreign exchange and traditional markets.

“It shows a step forward towards the integration of crypto and blockchain technology into the traditional financial system,” 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 $13.5 million investment 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 broad support from government and industry players, Australia will miss out on a multi-billion dollar opportunity,” he told AAP.

The Australian Taxation Office estimates that more than one million taxpayers have traded cryptoassets since 2018.

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

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

“There’s a general perception that it’s the Wild West and that a lot of these entities are mavericks and resist regulation,” he said.

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

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

The budget includes new laws to clarify that bitcoin and other cryptocurrencies will not be treated as foreign currency 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,” said H&R Block spokesman Mark Chapman.

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 to examine 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 will not be included in the new tax treatment.

Treasury will continue to survey digital assets, while the Australian Securities and Investments Commission looks at how they should be regulated as financial products and services.