Is Australia a crypto-friendly nation? Where does it stand on cryptocurrency?

The year 2021 was outstanding for cryptocurrency as digital assets gained massive popularity, thanks to their benefits and growth prospects. Cryptocurrencies are founded on the principle of decentralisation, which is a critical step in the direction of democratising wealth by putting power in investors' hands. The financial freedom with cryptos, however, comes at a high cost. In the crypto realm, you might strike gold and become a billionaire overnight, or you could lose a massive chunk of your wealth.

Also, as it is not regulated, criminals are increasingly using cryptocurrencies for illegitimate activities like money laundering, terror financing and tax evasion. Because of these illicit activities, several nations have either completely banned cryptocurrencies and exchanges or have heavily regulated them. According to a November 2021 report from the Law Library of Congress, 51 countries have decided to ban cryptos, either absolutely or implicitly.

As per the repot, China, Nepal, Algeria, Iraq, Bangladesh, Tunisia, Egypt, Qatar, Morocco have all decided to impose absolute bans on crypto trading and exchanges. Moreover, most of the other 41 nations that have adopted policies to regulate cryptos are in the Arabian Peninsula or Africa.

Australia, which ranks third in terms of crypto adoption according to comparison site Finder, last year said it would create a licensing framework for cryptocurrency exchanges and consider launching a retail central bank digital currency. Apparently, Australia is more optimistic about digital currencies than several other countries. 

According to Finder, the crypto ownership rate in Australia is 22.9%, followed by Indonesia (22.4%) and the Philippines (21.6%). And, with 72.7% of crypto owners holding Bitcoin, it is Australia's most popular crypto.

On that note, let us shed light on Australia's stance on cryptocurrency. 

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What’s the Australian government’s approach towards cryptos?

Rather than outright banning crypto, Australia has chosen to regulate it by introducing new laws and policies. In this regard, as part of the largest revamp of its payment system, Australia seeks to develop a licensing framework for crypto exchanges, besides mulling to introduce a retail central bank digital currency. 

In 2017, the Australian government officially declared that crypto exchanges and digital currencies are legal and made them subject to section 5 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF 2006). The lawmakers stated that Bitcoin should be recognised as "property" and liable to Capital Gains Tax (CGT). 

This change in tax treatment indicates how progressive is the Australian government’s stance on crypto.

Further in 2018, the Australian Transaction Reports and Analysis Centre (AUSTRAC) came out with robust regulations for cryptocurrency exchanges. As part of these regulations, crypto exchanges operating in Australia are required to register themselves with the AUSTRAC, in compliance with the AML/CTF 2006 Part 6A – Digital Currency Exchange Register. Entities acting as exchanges, or providing registrable exchange type services, are required to identify and verify their users and maintain records. They also have to comply with the government’s AML/CTF reporting obligations.

It may be noted that AUSTRAC CEO himself maintains the Digital Currency Exchange Register. If any exchange fails to register, then it will be subject to criminal charges and financial penalties.

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Last thoughts

Despite many countries deciding to impose a complete ban on cryptocurrencies and exchanges, Australia has not turned its back on cryptos. This can bring revolutionary changes in conventional methods of cash transactions.

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