More on that Australian decision

Wednesday 02 September 2015

In a recent article we gave an overview of bitcoin developments in Aus. Here, George Basiladze takes a closer look at what’s going on. George is a finance guy with an in-depth knowledge of financial systems. Together with his business partner Dmitry they designed the concept of Cryptopay in May 2013.

Read also: Aus Lightens up on bitcoin. Kind of. 

Following the release of the new Senate Report, Australian companies and individuals engaged with bitcoin can enjoy some clarity regarding the future of cryptocurrency operations in the country. The committee report contains a number of recommendations, but there have been no changes to laws or regulation for the time being. The Australian bitcoin industry will be encouraged to self-regulate in the short-term, with the results used to inform the nature of more long-term regulation.

Aus

Australia is slowly creating a legislatory framework for bitcoin, without the sheer inconvenience of the BitLicense

Arguably the most important part of the report is the committee’s clear recommendation that the ‘Goods & Services Tax’ law should be changed such that digital currencies fall within the definitions of ‘money’ and ‘financial supply’. Currently, exchanges and other bitcoin operations in the country are plagued with difficulties relating to taxation, and will often end up paying double-GST. However, despite the report’s recommendation, this type of change to the GST law would need to gain approval from each state, in addition to parliamentary legislation. This would be a long process and is an unlikely priority for politicians. However, there is hope in the form of the ongoing review of the country’s federal tax system, which could see broader changes to the GST law, with the specific bitcoin-related changes pushed through alongside.

The report recommends that the continuing review of Australia’s AML/CTF laws, ought consider whether Bitcoin and other digital currency activities should be included. It is more than likely that Australia will follow a similar approach to other countries such as the UK and Singapore, by expanding current AML/CTF laws to include digital currency exchanges. Bitcoin exchanges operating in the country will then be required to gather information from their users, through know-your-customer checks. It is also noted in the report that bitcoin start-ups have been struggling to perform KYC checks themselves, due to being unable to access the Document Verification Service, instead being forced to rely on alternatives.

Not cash

Bitcoin is not considered a financial product by Australia’s corporate and securities regulator, ASIC; this is a view which has been supported by the Senate Report, which suggests further research before any further changes are made in this area. This means no license is required to exchange bitcoin, or hold bitcoins on behalf of others in Australia, and this is unlikely to change in the foreseeable future. However, companies operating in payments processing and remittance are likely to be regulated as ‘non-cash payment facilities’, which will require them to obtain an Australian Financial Services License, or operate on a low-value exemption. Overwhelmingly, the report supports self-regulation, to help establish a set of best practice guidelines for digital currency businesses in Australia.

Overall, the report should be seen as encouraging to bitcoin businesses in the country; there will be no BitLicense in Australia, at least! The report shows a reasonably favourable approach to digital currency regulation, which both users and businesses should feel reassured by. The GST law difficulties will be overcome in time, and many businesses in the country have learnt to get around the problems by adapting their business models. Self-regulation will allow bitcoin start-ups to establish best practices which work them and their users. This will certainly assist the authorities in establishing sensible, well-informed regulation in the long term; an important step for a country which has a generally tech-savvy population and could ultimately become an important market for bitcoin globally.


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