Cryptocurrency Regulations in Australia – Coinpedia

Cryptocurrency and trading are legal in Australia. The laws here are also progressive. More than a million Australians, or 5% of the population, own cryptocurrency. After the events of 2022, the government decided to regulate the crypto market by adopting a stricter approach.

This module from Coinpedia covers aspects of the crypto framework absorbed by the Australian government in 2024.

Introduction

Australia has been considered a neutral and stable jurisdiction since blockchain and crypto companies. The Commonwealth Government of Australia has enabled a growth-led approach to the innovative financial services and fintech sector. Australia’s blockchain and crypto sector regulatory regimes have been very attentive. Digital assets have been covered by Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) since 2018. Cryptocurrencies are treated as property in Australia. However, blockchain and cryptocurrency in Australia have always celebrated a neutral stance and stable market incentives, encouraging technological innovation in payments, crypto assets, lending, investments and custody services.

Is crypto legal in Australia?

Cryptocurrency and associated exchanges were granted legal status in Australia in 2017. Since then, Australian government interference in the sector has been very minimal. However, in 2018, Australian crypto laws regulated AML and CFT measures for the crypto field. Consequently, the Financing Law 2006 began to include digital currencies in the AML and CFT regime.

The government has taken a soft approach towards the use of crypto in the country. However, due to the latest cryptocurrency crashes, they have been determined to adopt a more effective set of regulations regarding cryptocurrencies. The local jurisdiction does not address cryptography under any specific law. They are considered within the existing regulatory framework under Australian laws.

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

In 2013, the legal status of Bitcoin was clarified when the governor of Reserve Bank of Australia (RBA) said there would be no force in the country to stop people from transacting in another currency in a store if they wanted to! There is no law to prohibit the use of other forms of currency.

Bitcoin exchanges are well regulated in Australia. In 2018, the Australian Transaction Reporting and Analysis Center (AUSTRAC) has begun regulating Australian cryptocurrency exchanges. It ensures that all Australian exchanges comply with Australia’s strict AML and CFT laws. Exchanges are required to register as an exchange, identify and verify users, and maintain all financial records.

The current framework includes:

• Financial services are regulated by the Corporations Act 2001. Under current regulations, 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 (see Australian Securities and Investments Commission (ASIC) Information sheet)
• The credit activities and services regime, in which cryptocurrency lending activities would require a credit license under the National Consumer Credit Protection Act of 2009 (NCCPA)
• Electronic Transactions Regulations for self-executing transactions using blockchain or distributed ledger technology, pursuant to the Electronic Transactions Act of 1999.
• Consumer law and unfair contract terms under the Australian Consumer Law (ACL), set out in Schedule 2 of the Competition and Consumer Act 2010

Timeline of Crypto Regulations in Australia

2024

May 6, 2024: The Australian Tax Office (ATO) has forced cryptocurrency exchanges to hand over transaction details of 1.2 million accounts. The ATO used the data to identify traders who failed to report their cryptocurrency activities, in an effort to enforce tax compliance.

April 12, 2024 : The Australian Security and Investments Commission (ASIC) has launched civil proceedings against two Australian cryptocurrency companies, NGS and DCA Capital, following their collapse, leaving investors owing more than $160 million. Hundreds of Australian investors no longer have to pay anything.

2023

November 30, 2023: Australian Treasury outlines ‘proposed scam code framework’ to combat crypto scams

The Australian Treasury is proposing the “Proposed Scams Code Framework” to combat scams, including codes specific to the banking sector, cryptocurrencies and NFTs. The initiative addresses growing financial losses from scams in 2022. Comments from the consultations are invited until January 29, 2024.

October 16, 2023: Australian Treasury considers regulation of crypto exchanges, excludes individual tokens

The Australian Treasury has regulated crypto exchanges, requiring a financial services license under applicable laws. To qualify, exchanges or brokers must hold more than $5 million in total on their platform or more than $1,500 for each individual client.

September 4, 2023 : Australian Lawmakers Refuse to Approve Andrew Bragg’s Cryptocurrency Legislation

Australia’s Digital Assets (Market Regulation) Bill 2023 has suffered delays and the Senate committee, in a September 4 report, recommended against passing it. Dissenting Senators Bragg and Smith offered amendments and called for reflection on tax and banking issues.

29-March-2023: Australian senator proposes private bill to speed up crypto regulation

Senator Andrew Bragg introduced the Digital Assets (Market Regulation) Bill 2023 to the Australian Parliament, seeking to regulate cryptocurrency services, including trading, custody and issuance of stablecoins. The bill addresses consumer protection and investment promotion.

Read also: Australia Introduces New Crypto Regulation Proposal: Highlights

Taxation

Capital gains tax applies in Australia when it comes to cryptocurrencies! ATO can track crypto usage in Australia well. Here, crypto is not considered money or a foreign currency. Instead, the ATO classifies crypto as property and an asset for capital gains tax purposes. This includes coins, tokens, NFTs and stablecoins.

Depending on the transaction, crypto may also be considered additional income and taxed for income tax. Income tax applies when earning cryptocurrencies through airdrops and staking rewards.

CGT on crypto in Australia:

As an investor, you must consider CGT (Capital gains tax) when he has the cryptocurrency. Disposal may include selling crypto for Australian dollars (AUD) or other fiat currency, exchanging crypto for crypto, spending on goods or services, and offering crypto.

The net capital gain realized is paid at the income tax rate, based on last year’s income.

However, Australian residents enjoy a bit of relaxation thanks to a number of tax-free thresholds and allowances that also apply to crypto.

• Tax-free threshold: You won’t start paying income tax until you reach $18,200 in total income per year.
• 50% discount on long-term capital gains: If you hold your cryptocurrency for more than a year before selling or exchanging it, you may be entitled to a 50% discount on CGT.
• Personal use asset: You can benefit from capital gains tax exemption if you spend crypto that is a personal use asset.

The good news is that some crypto activities are tax-free in Australia! Here’s when you won’t pay tax on cryptocurrencies in Australia:

• Buy crypto with AUD.
• Hold crypto.
• Acquire crypto as a gift.
• Acquire cryptocurrencies from hobby-level crypto mining.
• Transfer crypto between your own wallets – but watch out for transfer fees.
• Buying goods and services with crypto – if the crypto is a personal use asset.
• Donate crypto to registered charities with deductible gift recipient (DGR) status

Mining is taxed depending on whether you are an amateur miner or a trader. The extracted parts will be subject to CGT upon their disposal. The exemption for goods for personal use does not apply here! A person who mines as part of a large-scale commercial operation is a commercial miner. The tax treatment here will strictly follow the stock trading rules!

Conclusion

With the latest crypto market crackdown, the Australian government has regulated the country’s crypto space to adhere to certain policies that will protect consumers from fraud and theft. The venue has always been crypto neutral and is adapting very quickly to this evolving space!

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