A senate committee looking at the state of cryptocurrency in Australia has recommended a raft of changes making it easier for investors and businesses to use, hold, and produce digital assets to strengthen the local blockchain industry.
The Senate Committee on Australia as a Technology and Financial Centre handed down its final report this week and has made 12 recommendations for how the government should treat cryptoassets.
Those recommendations include simplifying the way cryptocurrency capital gains are treated under tax law, the establishment of a market licensing regime for cryptocurrency exchanges, and a 10 per cent tax discount for businesses that mine cryptocurrency using renewable energy.
Committee Chair, Senator Andrew Bragg, said its investigation into cryptocurrency was of particular importance to younger Australians who are more inclined to invest in digital assets.
“Younger people are interested in digital assets and cryptocurrency because it provides them with agency and control that wasn't available to prior generations,” Bragg said when delivering the findings.
“We want Australians to have access to the best ideas, the best new options, the most choice, the most agency and the lowest prices.
“We don't want people to be dependent upon great big institutions like banks.
“We want people to be able to become the master of their own domain to the greatest extent possible, and that is what I think cryptocurrency and digital assets offer Australians.”
Changes to capital gains tax (CGT) law might be of particular interest to cryptocurrency investors.
Under the current tax system, just about every use of cryptocurrency – selling, using for transactions, converting to other currencies, or trading – results in a CGT event, complicating the use of decentralised finance (DeFi) products and making it more difficult for crypto investors to accurately report their tax.
The committee wants to change that, making it so that cryptocurrency transactions will “only create a CGT event when they genuinely result in a clearly definable capital gain or loss”.
Interestingly, the committee has also recommended the government update corporate law to allow for a decentralised autonomous organisation (DAO) company structure, formalising an increasingly common way blockchain and cryptocurrency organisations are self-managed.
Other recommendations from the committee appear to favour consumer protections, such as a purpose-built market licensing regime for cryptocurrency exchanges, alongside a minimum standards cryptocurrency custody regime.
Jonathon Miller, Managing Director of cryptocurrency exchange Kraken Australia, said he was supportive of the committee’s recommendations but was wary about the proposed market license changes, noting that existing anti-money laundering and counter-terrorism financing (AML/CTF) obligations have well-served the local industry.
“Indeed, it is highly contentious whether licensing market regimes are fit for purpose for crypto exchanges,” he said.
“We don’t have to look far to see the effects of a heavy market license on the industry of other jurisdictions such as Japan whereby only a small handful of exchanges are able to manage the costs associated with maintaining market licenses and those costs are ultimately passed onto consumers.
“On the same note, creating frameworks for custodial and depository services is positive, but there is the risk that the industry will be overburdened by regimes that are not fit for purpose and lead providers to shift operations offshore.”
