Crypto industry disappointed as Australia looks to scrap tax rules

SYDNEY, Oct 26 (Reuters) – The cryptocurrency industry said on Wednesday it was disappointed by Australia’s decision to continue treating digital currencies as assets for tax purposes, and not as foreign currency.

The government said in its budget announcement on Tuesday that it would introduce legislation to entrench the treatment of digital currencies such as Bitcoin as an asset.

This means investors will pay capital gains tax on profits from selling crypto assets through exchanges and when trading digital assets.

The legislation removes uncertainty following the decision by El Salvador to adopt Bitcoin as legal tender last September, the Australian government said in its budget announcement.

However, Australia said government-issued digital currency, or central bank digital currency (CBDC), will be treated as foreign currency.

Around 90% of the world’s central banks are using, testing or looking at CBDCs now. Most people do not want to be left behind by Bitcoin and other cryptocurrencies, but struggle with technological complexity.

Mitchell Travers, a former cryptocurrency exchange operator and founder of blockchain consultancy Soulbis, said the budget amendment was unclear and seemed at odds with the government’s testing of the viability of a CBDC.

“It would be ill-advised for the government to really take an enforcement approach to the taxation of crypto-assets in its early stages, especially given the fact that the Treasury is also investing in trying to migrate the traditional technology systems that underpin our financial system towards digital assets ,” Travers said.

“It would be an ironic dichotomy if they were to enforce the taxation of digital assets and then launch their own CBDC without clear definitions of which token corresponds to which tax treatment.”

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

El Salvador, which adopted Bitcoin as legal tender last year, faced huge financial losses due to the huge drop in crypto prices.

“I think they’re taking a snapshot in time and making a long-term assessment of what happened in El Salvador and the price of bitcoin,” said Caroline Bowler, CEO of BTC Markets, an Australia-based cryptocurrency exchange, adding that Australia will be left behind by other counties that have a more open-minded approach.

“Europeans are going to lead the way, the UK now has a Prime Minister familiar with central bank digital currencies,” Bowler said. “All these trading partners will go ahead of Australia unless we look at proportionate, responsible regulation.”

Reporting by Praveen Menon and Byron Kaye; editing Lincoln Feast

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