Australia to Implement Crypto Regulations in 2024
Cryptocurrency and exchanges have been deemed legal in Australia, with the country adopting a progressive approach to the industry. Approximately 1 million Australians, accounting for 5% of the population, own cryptocurrency. Following the events of 2022, the Australian government decided to implement stricter regulations to oversee the crypto market.
This module by Coinpedia explores the crypto framework that the Australian government has embraced 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-oriented approach to innovative financial services and the fintech sector. The regulations governing the blockchain and crypto sector in Australia have been considerate, with digital assets falling under anti-money laundering and counter-terrorism financing (AML/CFT) regulations since 2018. In Australia, cryptocurrencies are treated as property. The country has maintained a neutral stance and stable market incentives for blockchain and cryptocurrency, promoting technological innovation in payment systems, crypto assets, lending, investment, and custodial services.
Is Crypto Legal in Australia?
Cryptocurrency and related exchanges were granted legal status in Australia in 2017. Since then, government intervention in the industry has been minimal. However, in 2018, the Australian government introduced AML and CFT measures for the crypto realm. As a result, digital currencies were included in the AML and CFT regime outlined in the Financing Act 2006.
The government has taken a lenient approach towards crypto usage in the country. However, due to recent crypto crashes, they have been determined to implement more effective regulations concerning cryptocurrencies. Crypto is not subject to any specific law in the local jurisdiction but falls under the existing regulatory framework governed by Australian laws.
The Australian Securities and Investments Commission (ASIC) has specified that crypto assets are considered part of exchange-traded products (ETPs).
In 2013, the legal status of Bitcoin was clarified when the governor of the Reserve Bank of Australia (RBA) stated that there would be no restrictions on people transacting in alternative currencies in shops. There is no law prohibiting the usage of other forms of currencies.
Bitcoin exchanges in Australia are well-regulated. In 2018, the Australian Transaction Reports and Analysis Center (AUSTRAC) began regulating Australian cryptocurrency exchanges, ensuring compliance with strict 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 part of investment products or exchange-traded products require an Australian financial services license (AFSL) or an exemption.
– The National Credit Consumer Protection Act 2009 (NCCPA) regulates credit activities and services, requiring a credit license for cryptocurrency lending activities.
– The Electronic Transactions Act 1999 addresses self-executing transactions using blockchain or distributed ledger technology.
– The Australian Consumer Law (ACL) outlines consumer rights and protects against unfair contract terms.
Latest Regulations in 2024
In October 2023, the Australian government released its long-awaited proposal for a regulatory framework. According to the specifications, crypto exchanges will be required to hold a financial services license issued by the Australian Securities and Investments Commission. To qualify, exchanges or brokers must hold more than $5 million in aggregate on their platform or have more than $1500 for each individual customer. The draft bill outlining 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 ability to track crypto usage within the country. Crypto is not recognized as money or foreign currency but is classified as property and an asset for CGT purposes. This includes coins, tokens, non-fungible tokens (NFTs), and stablecoins.
Depending on the transaction, crypto may also be subject to income tax. Income tax applies when an individual earns crypto through airdrops and staking rewards.
CGT on crypto in Australia:
– Investors need to consider CGT when disposing of cryptocurrency, which includes selling crypto for Australian Dollar (AUD) or another fiat currency, swapping crypto for crypto, spending it on goods or services, or 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 exemptions and thresholds that also apply to crypto:
– Tax-free threshold: Income tax is only paid once total income exceeds $18,200 per year.
– 50% long-term capital gain discount: If crypto 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 crypto is used for personal purposes.
– Certain crypto activities are tax-free in Australia, such as buying crypto with AUD, holding crypto, acquiring crypto as a gift, acquiring crypto from hobby-level mining, transferring crypto between personal wallets, purchasing goods and services with crypto (if it’s a personal use asset), and donating crypto to registered charities with Deductible Gift Recipient (DGR) status.
Mining is taxed differently 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 commercial miners.
Conclusion
In response to recent crypto market fluctuations, the Australian government has implemented regulations to protect consumers from fraud and theft. Australia has maintained a neutral stance towards cryptocurrencies and has quickly adapted to the evolving crypto space.
Tags:
Cryptocurrency
Regulations News