Regulation of cryptocurrency and blockchain technology in Australia has been disorganized for too long. With old laws governing the new technology, the digital assets sector has not had a clear framework. The problem might end soon if the recommendations by the Australian Senate Committee become law. The ASC submitted its first report of Australia as a Technology and Financial Centre in November 2020. Then it brought in a second report on the same topic in April 2021. On the 20th October 2021, it presented its final report. The statement contains all problems that the leading players in the digital assets sector have faced.
Additionally, it includes up to twelve recommendations that will help address the absence of crypto and blockchain regulations in Australia. Currently, Australia treats profits on cryptocurrency transactions as a capital gain tax. As a result, Australia is behind Singapore that does not have a CGT. Sen. Andrew Bragg, the chairman of the Australian Senate Committee, expressed his belief that Australia could soon become a leader in digital assets. He said that Australian players can have access to lower fees and new choices after the change of laws and regulations. The recommendations and conclusions in his committee’s report are in chapter 6.
The committee recognized and acknowledged crypto-assets as a rapidly growing phenomenon that might soon become the focal point of the technology development and money markets. Chapter 2 of the report shows that seventeen percent of Australians already have cryptocurrencies while thirteen percent of the survey participants expressed their interest in buying them. Thus, the committee recognizes Australia as one of the most significant investors of cryptocurrencies on earth.
Again, the ATO (Australian Taxation Office) said that there is a dramatic rise in cryptocurrency trading since the start of the year 2020. Although innovative companies in the digital sector have created new jobs for Australians, the government and regulatory bodies do not understand it well. So the committee had recommendations to make on this issue and others affecting the digital assets sector. A summary of their recommendations include the following:
· The Australian Government should establish a market licensing system for handling digital currency exchanges. This is a licensing regime that would ensure robust consumer protection. It would also help banks worry less about the risks posed by individual digital assets providers. The DCEs who operate under the Market License regime featured in the Corporations Act 2001 will now have to demonstrate more commitment towards consumer protection. They will also eliminate difficult obligations on local operators if these recommendations become law.
· The Government should come up with a custody regime for the local digital assets sector. Although custodial arrangements for cryptocurrency and other digital assets can pose risks, the committee noted that these are the same risks found in the custodial framework for traditional assets.
· The Australian Government with the help of the Treasury and other relevant industry experts and regulators should carry out a token mapping task to find an accurate way to categorize and define different kinds of digital assets. It will ensure that each digital asset meets ASIC’s regulatory boundaries.
· The Australian Government should create new rules for companies using a Decentralized Autonomous Organization (DAO) structure to help get rid of intermediaries and centralized control.
· Clarification of the Anti-Money Laundering and Counter-Terrorism Financial (AML/CTF) to ensure they concur with the Financial Action Task Force guidelines. They have to execute the travel rule in a manner that does not undermine the running of genuine digital asset companies.
· Concerning the Capital Gains Tax or CGT, the committee asked the government to amend the regime. A CGT should emerge only if it results in an identifiable capital loss or gain.
· With the help of the Council of Financial Regulators, the Government should come up with a scheme to address the debanking problem. This is when banks refuse services to the local customers or businesses dealing with cryptocurrencies or other digital assets.
· The government via Treasury should do a policy review of the feasibility of retail Central Bank Digital Currency in Australia.
· The committee asks the government to edit relevant legislation to allow businesses involved in digital assets mining, or similar activities, to receive a company tax discount of ten percent. It should only occur if such companies use renewable energy for their operations.
The recommendations outlined in Chapter Six of the inquiry are now in the hands of the senate. It will debate the reforms and draft a bill. After voting on the bill, the Senate and the House of Representatives will pass it into law. You should read the chapter to understand the new reforms better.
Cryptocurrency regulation in Singapore
Singapore allows cryptocurrency trading. So it is legal to trade or keep Bitcoin or other types of cryptocurrencies in Singapore. As one of the leading nations to adopt blockchain and distributed ledger technology, it is not surprising that Singapore already has a working regulatory system for the industry participants. However, for Bitcoin exchange to be lawful, owners have to meet the licensing and regulation standards of the Monetary Authority of Singapore. MAS is the country’s central bank and financial regulator. It enforces legislation that relates to the financial sector. It also regulates the dollar currency issuance.
After the passing of the Payment Services Act in January 2020, licensing and regulation by MAS is now law. The regulation of Initial Coin Offerings (ICOs) comes under the Securities and Futures Act. So, businesses that want to offer such services should first get a license from the Capital Markets Service (CMS). There are also strict Cryptocurrency AML regulations and CFT laws in Singapore that specifically cater to digital payment tokens.
Concerning the regulation of mining Bitcoins and other cryptocurrencies, there is no legislation yet. However, the act of mining cryptocurrencies in Singapore is not unlawful. Due to the high costs of energy and space, investors are becoming fewer by the day. Besides, those who mine cryptocurrencies in Singapore have to abide by the ITA’s (Income Tax Act) tax rate of seventeen percent on the net profit.
Individuals and businesses that trade and profit from digital assets do not pay tax on their sales. Singapore does not ask for Capital Gains Tax, according to the Inland Revenue Authority of Singapore.
Final Word
Singapore is an international financial and technology haven. Cryptocurrency traders have a stable business environment with ample and fair regulations. In contrast, Australia is currently reviewing recommendations for the regulation of its digital assets sector. If the Senate and the House of Representatives turn these into law, the digital assets industry will have a clear framework to guide its operations and Australia can retain the foundations of its significant Cryptocurrency ecosystem.
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