With cryptocurrency updates regularly grabbing financial headlines, you might be wondering whether it’s worth investing in offerings like Bitcoin. In addition to the investment potential, you should also be aware of the latest cryptocurrency laws in Australia. So, is cryptocurrency legal in Australia? The country has paved the way in accepting cryptocurrencies, but along with this legal acceptance comes regulation.
What is cryptocurrency?
Cryptocurrency refers to any form of digital payment underpinned by blockchain technology. As with other countries, blockchain in Australia is a type of database structure that stores data across multiple computers.
Cryptocurrencies can be used to buy and sell any goods online. They can also be used to purchase more cryptocurrency; or saved and stored for investment purposes as they grow in value.
Is cryptocurrency legal in Australia?
Cryptocurrency was legalised in 2017, making Australia a fintech industry leader. However, there are strict regulations to be aware of when you’re determining how to buy cryptocurrency in Australia. When these digital currencies were legalised, the government declared that they were subject to the Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 (AML/CTF 2006). Here’s how this works.
The first set of cryptocurrency laws in Australia relate to its exchanges. These are legal, but all cryptocurrency exchanges must register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) in line with Part 6A of the AML/CTF 2006 rules.
This rule means that any entities acting as exchanges to buy and sell digital currency carry certain responsibilities. They must:
Register as exchanges
Identify and verify users
Maintain financial records
Comply with all AML/CTF reporting obligations
Non-compliance leaves cryptocurrency exchanges open to criminal charges or fines. With comprehensive verification procedures, AUSTRAC aims to prevent cryptocurrencies from being used for money laundering or to fund crime. It’s the provider’s responsibility to monitor any suspicious trading activity.
The regulations were then updated in May of 2019 by the Australian Securities and Investments Commission (ASIC), now requiring regulations for initial coin offerings (ICOs) and trading. Some ‘privacy coins’, a form of cryptocurrency designed to be anonymous, are now banned from listed exchanges.
Cryptocurrency consumer protection
Another regulation specific to cryptocurrency exchanges is that they must now hold an Australian Financial Services (ASF) license. These digital currency providers are treated the same way as other financial service providers under Australian law.
When selling crypto-assets like tokens for investment or financing purposes, they must classify these assets as financial products under the Corporations Act. This helps protect consumers who can rest assured that they’re buying licensed, regulated financial products. Consumers must be provided with relevant information like fee structures and guidelines.
Bitcoin regulations in Australia
Another point to be aware of relates specifically to Bitcoin regulation in Australia. Bitcoin, along with any other cryptocurrencies that share the same characteristics, should be treated as property for tax purposes. This means that they’re subject to Capital Gains Tax, just as with any other property. Before this change, cryptocurrency was subject to double taxation under the country’s goods and services tax (GST).
Additional cryptocurrency laws Australia
One of the biggest benefits of cryptocurrency, thanks to the blockchain in Australia and elsewhere, is that digital currency can be sent anywhere in the world – all in real time. Under Australian law, service providers can exchange one cryptocurrency to another. They can also exchange them for other currencies including traditional money. A final regulation to be aware of is that cryptocurrency issuers are prohibited from misleading customers. For example, providers can’t state that a token is regulated if it’s not.
The bottom line
If you’re wondering how to buy cryptocurrency in Australia, you should first find a licensed exchange to do so. With regulated service providers, you can rest assured that your purchase is protected as it would be with any other financial product. At the same time, it’s important to be aware of the Capital Gains Tax requirement when buying and selling, so that you don’t get an unwanted letter from the ATO.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.