If you’re one of the 800,000 Aussies who own cryptocurrency, you’ll want to hear this.
The Treasury has released a consultation paper detailing a proposed taxation system for cryptocurrency as well as protections for investors and regulations on digital banks, crypto exchanges and brokers.
It’s set to be the most comprehensive update to the way that crypto is regulated in Australia and has long been talked about by the Treasury.
The move is in response to a parliamentary report into the sector which found that Australia’s current regulations – or lack thereof – were not fit for purpose. They also respond to the huge rise in interest in the crypto space and will cover digital assets like NFTs and the Metaverse, as data shows 2021 saw a 63% increase in crypto purchases over the previous year.
Treasurer Josh Frydenberg announced the coming of these changes in December of last year and said that the move will be the biggest overhaul of the country’s payment sector in 25 years.
“Cryptocurrencies and assets are a global phenomenon and as more Australians invest in these new asset classes and embrace the new technologies underpinning them, it is critical that we have a robust and competitive tax and regulatory regime in place,” Frydenberg said.
The reforms seek to ensure that regulation is fit for purpose while remaining “light-touch” and avoiding undue restrictions. The paper also mentions the desire to “harness the power of the private sector” while recognising the “unique” nature of crypto.
To this end, the consultation paper also proposed a self-regulation model in the crypto space, handing minimum standards and trading regulation over to the industry itself. The idea behind this is that it could foster greater innovation in the space, something that the government seems keen to promote.
One of the key points relates to the ownership of private keys, used to access a person’s crypto assets, and aims to ensure that individuals are properly aware of the risk in the use of these while minimising the opportunity for failures in this area that could lead to a loss of assets.
Interestingly, the document appears to suggest that the government has no stated intention of creating a central authority to arbitrate crypto transitions. Doing so would require changes to the blockchain which they describe as “at least challenging and at best impossible.”
Overall, the paper seeks surety in the space and mainly seems to propose introducing minimum standards of practice and conduct for those who sell crypto. The government appears keen to avoid a repeat of a number of disasters that have occurred in the past few years, notably the collapse of MyCryptoWallet and ACX.io which led to people losing their assets and investments.
This is mainly good news, as unscrupulous dealers in the space have the potential to taint the reputation of the industry as a whole while restricting broader adoption of crypto.
In terms of what this means for consumers, there is little to worry about just yet. The consultation paper is now taking responses from the industry and interested parties and the reforms are expected to be introduced at the end of 2022.
At the same time, however, the Board of Taxation is also being asked to look into an appropriate policy framework to tax digital assets like crypto. This review will similarly be expected to conclude at the end of the year, meaning we could see implementation next year.
That could have significant implications for crypto traders, however, we will have to wait for the results of that before we all freak out and panic sell (or hold forever).