The number of people investing in cryptocurrencies is growing globally. According to a study by Roy Morgan, over one million people in Australia own cryptocurrency based on data from December 2021 to February 2022.
The Australian Taxation Office Speaks Out
Although cryptocurrencies first emerged in 2009, it took the Australian Taxation Office (ATO) over two years to issue guidance on how they should be treated in the country. In 2014, the ATO labeled Bitcoin as a “capital gains” asset instead of a foreign currency.
The agency has since published more general guidance on the taxation of cryptocurrencies and non-fungible tokens (NFTs). This article will focus on Australia’s new crypto tax and what it entails. Let’s dive in;
Licensing Requirements
The coming regulations will introduce new tax measures and guidelines for the operations of exchange platforms and crypto brokers. They will also help protect the investors’ funds.
According to Treasurer Josh Frydenberg, the country’s move to impose strict taxes on all types of transactions in the cryptocurrency industry is necessary to keep up with the sector’s rapid growth. He noted that Australia is becoming a leader in developing this technology and that the country’s regulatory and taxation systems are needed to support the industry.
One of the documents released by the government consults with the crypto industry on the licensing or rules regarding the custody of virtual goods. In addition, this has connections to the treasury’s plan to require crypto exchanges to keep Australian investors’ funds within their borders.
Stepping in to Protect Investors
The government also intends to establish regulations that will help ensure that the services offered by crypto providers are reliable. Due to the volatility of cryptocurrencies, the government cannot protect Australian users from the effects of these transactions. However, it hopes that by establishing regulations, the government can help the industry expand and create trust between customers and suppliers.
Users can have faith that exchanges recognized by the government will fulfil their obligations. These companies’ “Australian-made badge of approval” will serve as evidence of such.
“Token Mapping”
According to Jim Chalmers, the Australian Labor Party (ALP), the government plans to implement a “token mapping” strategy to govern the industry by the end of 2022. This new strategy aims to establish a framework for regulating the cryptocurrency industry in Australia. Chalmers noted that the government would use the strategy as a starting point for future regulations.
The government also intends to extract the recommendations from the report to protect the customers of cryptocurrency firms. Some of these include establishing licensing policies for firms that provide non-financial services.
Prime Minister Anthony Albanese also confirmed the development. He noted that the government aims to establish a balance in the large and relatively unregulated cryptocurrencies industry.
Taxation is Essential for Widespread Crypto Adoption
Andrew Bragg, an Australian senator, discussed the taxation structure for digital services. He suggested that the government establish a Digital Services Act. This act would help ensure that the country’s goal of becoming a digital hub remains feasible.
The proposed act aims to establish technological neutrality, followed by extensive rules that are flexible and can be used to govern the government. Senator Bragg also called for the establishment of a more inclusive government and the removal of rigid institutions.
He noted that the proposed act should be well-defined and simple to understand. It would allow the government to accommodate the growing digital space in the country. Like treasurer Josh Frydenberg, Bragg also emphasized the importance of having proper tax regulation.
He said Australia cannot achieve its goals without reforming the tax system:
“You can have the best regulation in the world, but if you are not tax competitive, then it is not going to work.”
Frydenbeg said earlier that he would work closely with Bragg to implement proposed changes in the payment sector. He acknowledged that the changes could be the hardest to make in the country’s payment industry over two decades.
Meanwhile, the proposed regulations for the Australian crypto industry would also address investors’ concerns regarding the potential impact of cryptocurrencies on the country’s climate. The government is working toward establishing a net-zero economy, which aims to balance the emissions produced by the production and consumption of greenhouse gases.
Which Regulatory Framework Currently Governs Crypto in Australia?
This year, Australia is working on introducing regulations related to the operation of cryptocurrencies. That isn’t the country’s first enacted legislation related to crypto. In 2017, Australia became one of the first jurisdictions in the world to legalize cryptocurrencies.
The Australian law initially recognized Bitcoin and other digital assets as property, thus subject to capital gains tax. However, the government has made a few adjustments to these laws due to the high adoption rate countrywide.
Despite the various steps to regulate the operations of cryptocurrencies, challenges remain. As more people start to use cryptocurrencies, the need for regulations also increases, which could ultimately force the government to update its regulations.
Various groups have called for the regulations to be maintained as they are. They believe that the new legislation would restrict the development and innovation of the crypto industry. However, leaders like Senator Bragg believe big tech has too much power over society. Hence, the government should take action to limit its growth.
Sourced from crypto.news.
Written by Julius Mutunkei on 2022-08-26 09:00:00.
