As a rapidly evolving digital asset, trading in cryptocurrencies can feel like you’re constantly dodging legal and regulatory minefields. With so much talk about cryptocurrency and potential market regulations, you may be curious as to how legal trading in cryptocurrencies is in Australia.
Historically, Australia has taken a progressive approach to fintech. Outside of the Royal Commission into Misconduct in Financial Services Industry in 2019, the financial sector and its regulatory bodies typically encourages growth an innovation. This was evident in 2017, when a previous regulation that saw cryptocurrency subject to double taxation under GST was removed.
Currently, cryptocurrencies and cryptocurrency exchanges are legal in Australia, including Bitcoin, Ethereum, Ripple and even Dogecoin. But what legal protections are in place for crypto traders, and could that change in the future?
Legal protections around cryptocurrency in Australia
As of 2017, cryptocurrencies have been declared legal in Australia. They are required to follow the Anti-Money Laundering and Counter-Terrorism Financing Act. Bitcoin and other cryptocurrencies are also subject to the Capital Gains Tax.
In 2018, new laws for digital currency exchange (DCE) providers were implemented by Australia’s financial intelligence agency, AUSTRAC. DCEs were now required to register with AUSTRAC and meet Government AML/CTF compliance and reporting obligations.
Further, according to the Australian Securities and investments Commission (ASIC), there are now regulator guidelines that crypto-asset participants must adhere by, including issuers of crypto-assets, crypto-asset intermediaries, miners and transaction processors, crypto-asset exchange and trading platforms, payment and merchant service providers, wallet and custody service providers, and consumers
Is there enough regulation in the cryptocurrency market?
In recent months, we’ve seen a public call for greater regulation across the cryptocurrency market in Australia. Despite big players like Elon Musk publicly backing cryptocurrencies and helping make them more mainstream, not everyone is convinced it’s ‘safe as houses’.
Earlier in May, reports that a parliamentary inquiry will investigate how to better regulate cryptocurrencies emerged, as per the Sydney Morning Herald
The committee, chaired by NSW Liberal Senator, Andrew Bragg, would look at the “policy and legal backdrop facing cryptocurrencies in Australia compared with the approaches being taken in Canada, Singapore, the United Kingdom and the European Union. The committee will be assessing options for the development of a comprehensive regulatory framework for cryptocurrency and digital assets.”
Last week, Liberal Senator, Andrew Bragg, spoke to Sky News about cryptocurrency market regulation, arguing there “may be a case” to do so.
“The reality is these products are out there and people are using them, and we need to make sure we have the right policy and regulatory environment to be able to maintain our competitive advantage but also to protect consumers,” Mr Bragg told Sky News.
Currently, cryptocurrency exchanges are mostly unregulated in Australia and, as mentioned above, operators are simply required to register with AUSTRAC
As of Monday, the former Australian head of the world’s largest cryptocurrency exchange, Binance, called for greater regulation of crypto trading platforms, according to an interview in the Sydney Morning Herald.
Former Binance chief executive officer, Jeff Yew, said he believed “while Australia was more advanced with its regulation compared with other economies, much more still needed to be done to prevent everyday investors from being exploited by dodgy operators”.
“It really hurts me to see players exploiting that lack of [regulatory] clarity with users. That’s not what we want to see when you’re talking about long-term progression of the crypto sector in Australia,” said Mr Yew.
Just like with the trade of any currency, scrutiny into cryptocurrency is likely to continue if there are everyday Australians looking to invest in it.
If Australia wants to retain its reputation as a country that supports growth and innovation in this sector, it’ll be interesting to see if and how the regulation of cryptocurrency changes over the next few years.