Australia on changing laws to accommodate cryptocurrencies

A terminal to accept payments using bitcoins is displayed on the tape at the Old Fitzroy pub in Sydney, Australia.

Cameron Spencer | Getty Images

A Senate report said Australia needs to introduce new regulations for digital asset miners, such as tax cuts and a licensing system for cryptocurrency exchanges, to be “competitive with Singapore, the United Kingdom and the United States.”

The report, which was published by the Senate Committee on Australia as a Technology and Financial Center on Wednesday, also called for clarification of rules regarding when banks can refuse to deal with commercial customers involved in cryptocurrency.

Many major financial institutions in Australia have not taken up the cryptocurrency sector, despite its explosive growth in the past year, due to its high risks.

The report added that Australia should reform its rules to make room for entities that have a “decentralized autonomous company structure” and their tax rules so that people pay tax on digital assets only when they achieve “clearly defined capital gains”.

“This means that Australians can have greater control over their financial destiny rather than relying on endless mediation,” said commission chairman Andrew Bragg.

“The panel recommended a comprehensive crypto framework to deliver Australian leadership. We will be able to compete with Singapore, the UK and the US,” he added.

Australia has struggled to keep pace with the growth in the digital asset economy, which covers the exchange of cryptocurrencies, blockchain-based security tokens, and non-fungible tokens, or “NFTs,” which provide online property ownership.

The report said the Australian Taxation Office had observed a “significant increase in trading” since early 2020 when the Covid-19 shutdown triggered a flurry of online investment activity, sending the prices of some cryptocurrencies to record highs.

However, estimates of the Australian digital asset market size vary widely. Researcher finder.com.au said that one-sixth of Australians owned A$8 billion ($6 billion) worth of cryptocurrency in 2021, with Bitcoin being the most popular.

Digital market participants welcomed the report but cautioned that the rules needed to change faster.

said Mark Carnegie, a venture capital investor with interests in digital assets.

Carolyn Boehler, CEO of BTC Markets for bitcoin exchange, said the report exceeded expectations by including “actionable recommendations… to give a significant boost to Australia’s placement on the global fintech map.”

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