The Select Committee on Financial Technology and Regulatory Technology tabled its final report into the regulation of cryptocurrencies such as bitcoin and Ethereum in Australia which could sound in sweeping reforms of Australia’s booming cryptocurrency industry.
The report includes 12 recommendations focused on bringing crypto and broader fintech regulatory framework in line with the industry’s rapid growth and development. Including the establishment of a new market licensing regime for digital currency exchanges. This would operate similarly to the current regimes which regulate market operators like the ASX, and would include capital adequacy requirements, regular auditing and responsible person tests.
Also establish a “bespoke” custody or depository regime for digital assets under the new proposals, aimed at bolstering consumer confidence when it comes to storing assets such as bitcoin.
Additionally – and importantly -A “token mapping” exercise would be carried out under the committee’s new proposals, aimed at appropriately characterising different crypto assets and determining if they are considered financial products or not, a move which would require some exchanges or crypto promoters to register for an Australian Financial Services License (AFSL).
TAX: Tax treatment of cryptocurrencies has also been a major sticking point for the industry. Digital assets such as bitcoin and Ethereum are currently considered CGT assets and are therefore eligible for capital gains tax, with the sale of those assets viewed as a taxable, CGT event. That is why Under the committee’s recommendations, the taxation system would be amended to provide more flexibility in these circumstances, specifying that digital asset transactions should only create a CGT event when they “genuinely result in a clearly definable capital gain or loss”.
DAOs: Another important changes recommended by the report include the establishment of a new company structure to allow decentralised autonomous organisations (DAOs) to operate in Australia, a move which would put the country at the forefront of regulatory change in this area.
Good news for going green too: Bitcoin or other crypto miners would also receive a 10 per cent discount on company tax if they source renewable energy, with the committee not wanting crypto mining to “undermine Australia’s net zero emission obligations”.
De Banking: Senator Bragg’s committee has also called for a number of changes to prevent businesses and consumers in crypto and other industries from being ‘de-banked’, a common issue in the sector where banks refuse to work with certain customers they deem to be high risk.
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