Australia decides to treat crypto as an asset class in the 2022 budget

Amid the world’s jurisdictions preparing legislation for the crypto sector, Australia takes a less favored approach to taxation.

On Tuesday, Australia released the national budget for 2022-2023. The Australian government mentioned in the papers that digital assets will be recognized as an asset class for tax policy purposes and not as foreign currency. However, cryptocurrencies launched by the government or Central Bank Digital Currency (CBDC) will be treated as foreign currency.

In particular, around 90% of the world’s central banks have interacted, developed or tested the CBDCs program to enable faster and cheaper cross-border payments. Every country wants to stay trapped using Bitcoin and other currencies as useful financial instruments. But technological complexity emerges as one of the most critical problems.

The latest announcement clarifies the Aussie regulator’s stance on the blockchain industry, as it declared in June not to follow in the footsteps of El Salvador in making BTC legal tender. Incidentally, it was the first time that virtual assets became a topic discussed in a federal budget, which points to the fact that the popularity of digital assets continues to increase.

Crypto traders pay tax on capital gains

Nonetheless, the bill seeks to impose annual capital gains taxes on traders who used centralized exchanges while trading digital assets. And to get to that, the government plans to introduce legislation codifying the necessary implementations for an asset like Bitcoin (BTC).

The purpose of addressing virtual currencies in the paper is to clarify the regulatory approach chosen by state lawmakers, an industry expert noted while commenting on the budget.

The budget criticized El Salvador’s move to legalize Bitcoin, which is now suffering heavy losses as the BTC price has plummeted. It added that El Salvador’s decision,

“has the potential to create uncertainty about the status of cryptoassets such as bitcoin for tax purposes in Australia.”

While the proposed rules will make it clear to the Australian asset holder that he must meet the consistent tax requirement.

Industry experts criticized Australia’s legislation

Moreover, criticism from the crypto community has also appeared on this government decision. Mitchell Travers, former cryptocurrency exchange operator and founder of blockchain consultancy Soulbis, expressed that the government’s move appears unclear and does not address the ongoing testing of CBDC viability. He added;

It would be ill-advised for the government to really take an enforcement approach to taxing crypto-assets in its early stages, especially considering the fact that the Treasury is also investing in trying to migrate the traditional technology systems that support our financial system towards digital assets.

Another CEO of Australia-based cryptocurrency exchange BTC Markets, Caroline Bowler, argued that by taking effect with these unclear guidelines, the country will stand far apart from other countries that chose an open-minded strategy. He said;

I think they are taking a snapshot in time and making a long-term assessment of what happened in El Salvador and the price of bitcoin.

Featured image from Pixabay and chart from TradingView.com