Stocksak: Australia’s attempt to enshrine tax rules in crypto industry is a disappointment

© Stocksak. FILEPHOTO: This illustration shows the cryptocurrency Bitcoin, Ethereum, Dash and plunge into water. It was taken on May 23, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Praveen Menon, Byron Kaye

SYDNEY, (Stocksak), – The cryptocurrency industry expressed disappointment Wednesday with Australia’s decision not to treat digital currencies as foreign currency but as assets for tax purposes.

In its Tuesday budget announcement, the government stated that it would introduce legislation to codify digital currencies as assets.

Capital gains tax would be payable by investors on profits from trading digital assets and selling crypto assets via exchanges.

The legislation will remove uncertainty after El Salvador adopted Bitcoin as legal tender in September 2013, the Australian government announced in its budget announcement.

Australia stated that digital currency issued by the government or central banks (CBDC) would be treated as foreign money.

Around 90% of central banks around the world are currently using, testing or considering CBDCs. While most don’t want their country to be left behind by Bitcoin or other cryptocurrencies, many are still trying to understand the technological complexities.

Mitchell Travers, a former crypto exchange operator and founder Soulbis Blockchain Consultants, stated that the budget change was not clear and seemed to be at odds with government testing into whether a CBDC is feasible.

Travers said, “It would not be wise for the government really to take an enforcement strategy to tax crypto assets in their early stages, especially given the fact that Treasury is also investing to try to migrate our financial system over to digital assets.”

“It would be an ironic paradox if they were able to enforce the taxation on digital assets and then launch their CBDC without clear definitions as to what token equals which tax treatment.”

The crypto sector is largely unregulated in Australia and the Treasury said in August it would prioritise ‘token mapping’ work, which will help identify how crypto assets and related services should be regulated.

El Salvador, which adopted Bitcoin last year as its legal tender, suffered severe economic losses due to the massive drop in crypto prices.

“I think they are taking an instant in time and making an evaluation for a long period around what happened in El Salvador, and the price of Bitcoin,” Caroline Bowler, CEO at BTC Markets, an Australia-based cryptocurrency exchange, said. She added that Australia will be left behind if other countries adopt a more open-minded approach.

Bowler stated that “Europeans will be pulling ahead, and the U.K. now have a prime minister who knows central bank digital currencies,” Bowler stated. “All these trading partner will be pulling ahead Australia unless there is proportional, responsible regulation.”

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