10 Apr, 24

What are the main Australian Digital Currency Laws?

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Australia has emerged as a progressive nation in terms of digital currency regulation. The country’s approach aims to balance innovation in the fintech sector with the need for consumer protection and financial stability.

Goods and Services Tax (GST) on Digital Currencies

Since July 2017, transactions involving the sale or purchase of digital currency are exempt from GST. This exemption applies as long as the digital currencies are used as a payment method for goods or services that have already been taxed under the GST system. However, digital currency miners must register for GST if their annual turnover exceeds $75,000 AUD, and they may register voluntarily to claim input tax deductions from the Australian Taxation Office (ATO) for the GST cost of their business acquisitions​ (Coin Culture)​.

Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Laws

Australia has expanded its AML and CTF laws to include digital currency exchange providers. The proposed reforms, released in April 2023, aim to extend AML/CTF obligations to crypto-to-crypto exchanges and custody services, not just fiat currency exchanges. Additionally, the “travel rule” will be extended to digital currency exchange providers and remitters, requiring them to include both payer and payee information in electronic transfers to increase transparency​ (The National Law Review)​.

Token Mapping and Future Regulatory Plans

The Australian government has initiated a “token mapping” exercise to categorize digital assets and determine their regulatory requirements. This initiative is part of a broader effort to establish a framework for regulating the crypto industry, including rules on custody and exchange to protect customers in the event of incidents like the collapse of a major cryptocurrency exchange. The government plans to implement exchange rules and custody arrangements that require registered exchanges to use “Know Your Customer” (KYC) procedures, adhere to annual reporting requirements, and monitor and report suspicious transactions​ (Coin Culture)​.

Regulatory and Licensing Framework

In October 2021, the Senate released its final report on the regulation of cryptocurrencies and digital assets, emphasizing the opportunity for Australia to develop a regulatory and licensing framework that enables innovation. The report also addressed issues related to the de-banking of Australian FinTechs and other companies, as well as the policy for neobanks in Australia​ (Ashurst)​.

Conclusion

Australia’s regulatory approach to digital currencies is evolving to keep pace with the rapid development of the crypto industry. By implementing comprehensive GST, AML, and CTF regulations, and exploring innovative regulatory frameworks, Australia aims to create a balanced environment that fosters innovation while ensuring consumer protection and financial stability.

FAQs

  1. Is cryptocurrency legal in Australia? Yes, cryptocurrencies are legal and treated as property in Australia. They can be traded, spent, received, and stored, but businesses are not required to accept them as payment​.
  2. How is cryptocurrency regulated in Australia? Australia has taken a moderate approach to cryptocurrency regulation, focusing on consumer protection and market integrity. Cryptocurrencies are regulated under Australian law, even though there is no separate area of law specifically for them​.
  3. What are the GST implications for cryptocurrency mining in Australia? A cryptocurrency miner must register for GST if their annual turnover exceeds $75,000 AUD. Miners who do not meet this threshold may still register voluntarily to claim input tax deductions for the GST cost of their business acquisitions​.
  4. What is the “travel rule” in the context of Australian digital currency laws? The “travel rule” requires financial institutions to include payer information in electronic transfers of fiat currency. Proposed reforms aim to extend this rule to digital currency exchange providers and remitters, requiring them to include both payer and payee information in electronic transfers​.
  5. What is token mapping in the Australian regulatory context? Token mapping is a “world-first” exercise initiated by the Australian government to categorize digital assets and determine how they must be regulated. It is part of the broader effort to establish a regulatory framework for the crypto industry in Australia​.

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