Australia’s Cryptocurrency Regulations in 2024

Cryptocurrency and exchanges have been deemed legal in Australia, and the country has adopted progressive laws in this regard. It is estimated that 1 million Australians, equivalent to 5% of the population, own cryptocurrency. The government decided to regulate the crypto market more tightly after the events of 2022.

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Coinpedia’s module covers the crypto framework implemented by the Australian government in 2024.

Introduction

Australia has established itself as a neutral and stable jurisdiction for blockchain and crypto businesses. The Commonwealth Government of Australia has fostered a growth-driven approach for innovative financial services and the fintech sector. The regulations surrounding blockchain and cryptocurrency in Australia have been mindful and considerate. Since 2018, digital assets have been subject to anti-money laundering and counter-terrorism financing (AML/CFT) regulations. In Australia, cryptocurrencies are treated as property. The country has consistently maintained a neutral stance and provided a stable market environment to encourage technological innovation in payment systems, crypto assets, lending, investment, and custodial services.

Is Crypto Legal in Australia?

Cryptocurrency and related exchanges obtained legal status in Australia in 2017. Since then, the government has had minimal interference in the industry. However, in 2018, the country introduced AML and CFT measures for the crypto realm. As a result, digital currencies were included in the AML and CFT regime under the Financing Act 2006.

The Australian government has generally taken a lenient approach to crypto usage in the country. However, due to recent crypto crashes, they have decided to implement more effective regulations for cryptocurrencies. Currently, there is no specific law dedicated to crypto in the local jurisdiction; instead, they are governed by existing Australian laws.

The Australian Securities and Investments Commission (ASIC) has clarified that crypto assets are considered part of exchange-traded products (ETPs).

In 2013, the legal status of Bitcoin was clarified by the governor of the Reserve Bank of Australia (RBA), stating that there would be no legal hindrance to people transacting in other currencies in shops. There is no law prohibiting the usage of alternative forms of currency.

Bitcoin exchanges are well-regulated in Australia. In 2018, the Australian Transaction Reports and Analysis Center (AUSTRAC) began regulating Australian cryptocurrency exchanges to ensure compliance with AML and CFT laws. Exchanges are required to register, verify users, and maintain financial records.

The current regulatory framework includes:

– The Corporations Act 2001, which governs financial services. Crypto assets that are or form part of an investment product or exchange traded product require an Australian financial services license (AFSL) or an exemption.
– The National Credit Consumer Protection Act 2009 (NCCPA), which covers credit activities and services. Cryptocurrency lending activities require a credit license.
– The Electronic Transactions Act 1999, which regulates self-executing transactions using blockchain or distributed ledger technology.
– The Australian Consumer Law (ACL), set out in Schedule 2 of the Competition and Consumer Act 2010, which covers consumer law and unfair contract terms.

Latest Regulations in 2024

In October 2023, the Australian government released its long-awaited regulatory framework proposal. According to this proposal:

– Crypto exchanges will be required to obtain a financial services license from the Australian Securities and Investments Commission.
– To qualify for the license, exchanges or brokers must hold more than $5 million in aggregate on their platform or more than $1500 for individual customers.
– The draft bill covering these regulations is expected to be released in 2024.

Taxation

In Australia, Capital Gains Tax (CGT) applies to cryptocurrencies. The Australian Taxation Office (ATO) has the means to track crypto usage in the country. Crypto is not considered money or foreign currency; instead, it is classified as property and subject to CGT. This includes coins, tokens, NFTs, and stablecoins.

Depending on the transaction, crypto may also be subject to Income Tax. For example, income tax applies to crypto earned through airdrops and staking rewards.

When disposing of cryptocurrency, investors need to consider CGT. This includes selling crypto for Australian Dollars or another fiat currency, swapping crypto for crypto, spending it on goods or services, and gifting crypto. The net capital gain is taxed at the income tax rate based on the previous year’s income.

However, Australian residents enjoy certain tax-free thresholds and allowances that apply to crypto as well. These include:

– Tax-free threshold: Income Tax is only applicable once the total income per year exceeds $18,200.
– 50% long-term capital gain discount: If the cryptocurrency is held for more than a year before selling or trading, a 50% CGT discount may apply.
– Personal use asset: Capital gains tax may be exempted if the crypto is used for personal purposes.
– Certain crypto activities are tax-free in Australia, such as buying crypto with Australian Dollars, holding crypto, acquiring crypto as a gift, acquiring crypto from hobby-level mining, transferring crypto between personal wallets (excluding transfer fees), purchasing goods and services with crypto (if it is a personal use asset), and donating crypto to registered charities with Deductible Gift Recipient (DGR) status.

Mining is subject to taxation based on whether it is considered a hobby or a commercial operation. Mined coins are subject to CGT upon disposal, and the personal use asset exemption does not apply to mining conducted as a large-scale business operation.

Conclusion

In response to recent market volatility, the Australian government has implemented regulations to protect consumers from fraud and theft in the crypto space. Australia has maintained a neutral stance towards cryptocurrencies and has been quick to adapt to the evolving landscape.

Tags: Cryptocurrency, Regulations, News