“Cryptocurrency” refers to digital or virtual money that utilizes cryptography to secure transactions and functions independently of a central banking institution. In Australia, the use and trading of cryptocurrency have steadily increased, which has led the government to review rules for this business. This article will discuss the present state of the regulations for cryptocurrency in Australia, along with what the next few years might hold.
The Australian government has adopted an approach of caution when it comes to regulating cryptocurrency. The Australian Taxation Office (ATO) considers cryptocurrencies to be tax-deferred assets. That means that if you own crypto as an investment, you have to record the transaction to be able to report it for tax purposes. The ATO also requires companies that accept cryptocurrency payments to document transactions.
In 2017 the Australian government introduced legislation that regulates cryptocurrency exchanges. The law requires sales to be registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and to comply with anti-money laundering, counter-terrorism funding (AML/CTF) law. Exchanges are required to keep track of transactions and report any suspicious activities.
In 2019, The Australian Securities and Investments Commission (ASIC) issued instructions regarding how the Corporations Act 2001 applies to cryptocurrency. The guidance addresses questions like the definition of a cryptocurrency as a financial instrument, the legal requirements for issuing an initial coin offer (ICO), and the obligations for cryptocurrency exchanges.
The Australian government has indicated that it might introduce further regulations on cryptocurrency shortly. In the year 2019, the Treasury published a consultative paper regarding how to regulate digital currency. The article suggested a variety of measures, such as:
- Establishing a licensing scheme for wallet and cryptocurrency exchange service providers.
- Exchanges are required to maintain a certain amount of capital as well as to be able to provide sufficient security and risk management.
- Exchanges must have mechanisms to stop market manipulation and protect customers from theft and fraud.
- Exchanges are required to signal suspicious activity to AUSTRAC.
- Invite ICO issuers to adhere to disclosure requirements and give investors sufficient details about the dangers.
The report also suggested possibilities of regulating cryptocurrency in the current laws on financial services, including the Corporations Act 2001 and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The Australian government has yet to implement any suggested measures. However, they offer an idea of how regulation could follow.
Impact of Regulations
The effect of regulation regarding cryptocurrency in Australia will likely have mixed results. On one side, rules could aid in protecting customers by ensuring that exchanges have sufficient security and risk management plans. It may also assist in stopping fraud and manipulation of markets.
On the other hand, excessive regulation can hinder innovation and investment in the sector. It may also make it harder for legitimate companies to be able to function as well as for consumers to access cryptocurrency-related services.
One of the biggest challenges in regulating cryptocurrency is that it results from a global trend. Exchanges and wallet providers for cryptocurrency tend to be located in other countries, making it challenging for regulators to enforce their regulations. That’s why cooperation between international organizations is essential for controlling cryptocurrency.
It is a fast-growing business with both opportunities and risks for consumers and companies. The Australian government has chosen to be cautious when it comes to the regulation of cryptocurrency. Still, additional rules may be implemented soon. The impact of these laws will be contingent on their nature and how they are put into effect.
Any regulation must strike the right balance between protecting consumers and stimulating innovation in the field. International collaboration is also going to be vital for regulating cryptocurrency efficiently.