Cryptocurrency Legislation Landscape in Australia, 2024

Australia’s approach to cryptocurrency regulation in 2024 is marked by a progressive and evolving stance, reflecting the government’s intent to create a structured and regulated environment for digital assets. The country is actively working towards establishing a comprehensive regulatory framework for the cryptocurrency sector, with the Treasury drafting legislation that aims to include licensing and custody guidelines for companies offering digital assets. This legislation, expected to be passed in 2024, will provide a 12-month transition period for Australian exchanges to comply with the new legal framework, although the licensing system may not be fully operational until 2025​​.

Michael Bacina, the chair of Blockchain Australia, emphasizes that the proposal’s strategy focuses on consumer protection and includes a wide variety of business types currently operating without regulatory oversight. The approach may extend to NFT licensing and holding customer assets​​. In line with this, cryptocurrency exchanges are required to obtain an Australian Financial Services license if they hold significant assets, underscoring the government’s engagement in creating a level playing field and balancing consumer protection with innovation in the cryptocurrency industry​​.

The country’s historical stance has been neutral and stable, encouraging growth in the fintech sector. However, the pace has moderated due to various factors, including global economic trends and increased regulatory enforcement. Cryptocurrencies have been under the anti-money laundering and counter-terrorism financing regime since 2018. The Australian Securities and Investments Commission (ASIC) provides guidance on the regulatory status of crypto assets, especially those forming part of exchange-traded products and other investment products​​.

The Australian government is also considering the future of Central Bank Digital Currencies (CBDCs). The Reserve Bank of Australia (RBA) currently has no immediate plans to issue a retail CBDC but is exploring use cases for wholesale CBDCs and may regulate stablecoin payment systems that become integral to Australia’s payment infrastructure​​.

For the sale of cryptocurrency and other digital assets, Australia adheres to its existing financial services regulatory regime. Entities dealing in financial product crypto assets must comply with various regulatory requirements under the Corporations Act, including disclosure, registration, licensing, and conduct obligations. This comprehensive approach also covers the marketing of crypto assets, ensuring that financial product offers to retail clients are accompanied by a regulated disclosure document​​.

Australian Consumer Law applies to crypto asset sales, prohibiting misleading or deceptive conduct in marketing and advertising. This includes ensuring the promotional material for crypto sales does not contain false information and that buyers are not misled or deceived​​.

Taxation of cryptocurrency in Australia is an evolving area, with the Australian Taxation Office (ATO) viewing cryptocurrency as an asset for income tax purposes. The tax implications depend on the purpose for which the cryptocurrency is acquired or held, with different rules applying to business transactions, isolated transactions, and cryptocurrency investments​​.

Staking cryptocurrency and initial coin offerings (ICOs) also have specific tax implications. Rewards from validating and verifying transactions in a blockchain are treated as ordinary income, and coin issuances in the context of ICOs may be assessable in Australia​​.

The Australian goods and services tax (GST) treatment of cryptocurrency has been clarified, with supplies and acquisitions of digital currency made from 1 July 2017 not subject to GST, as they are considered input-taxed financial supplies​​.

Lastly, the ATO has created a specialist task force to tackle cryptocurrency tax evasion, and the Australian Transaction Reports and Analysis Centre (AUSTRAC) requires digital currency exchange providers to register and adhere to AML/CTF regulations. This includes implementing know-your-customer processes and reporting obligations​​.

In conclusion, as of 2024, Australia’s approach to cryptocurrency regulation reflects a balanced pursuit of innovation, consumer protection, and adherence to financial and legal standards, with ongoing efforts to refine and adapt its regulatory framework to the evolving nature of digital assets.