Cryptocurrencies are quite popular in Australia. For example, in 2020, around 18% of people owned cryptocurrencies. With a good number of people showing interest in cryptocurrencies, the state of crypto regulations in Australia is evolving. Indeed, the government implemented anti-money laundering (AML) laws to regulate them and their providers. In early December, Treasurer Frydenberg announced that the government would work on a new framework to modernize the already-existing system.
Let’s have a look at the state of crypto regulations in Australia.
Crypto regulations in Australia
Australia included cryptocurrencies in the AML regulation in 2018. Cryptocurrencies and cryptocurrency exchanges are legal and regulated in the country.
The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 defines cryptocurrencies as a digital representation of value that:
- can be used as a medium of exchange, a store of value, or a unit of account;
- is not issued by a government body;
- is interchangeable with money and may be used as consideration for the supply of goods or services; and
- is publicly available without restrictions.
Besides, the Act considers digital currency exchange businesses (digital currency to money and money to digital currency) as obliged entities. Therefore, they must comply with a set of AML and counter the financing of terrorism (CFT) policies such as:
- conducting customer due diligence;
- monitoring transaction activity; or
- reporting suspicious or large ($10,000+) transactions.
Also, since 2019, token issuers must get an Australian Financial Services license, while crypto trading platforms must comply with additional Australian financial requirements such as securing an Australian market license.
Registration of cryptocurrency exchanges
The AML/CFT Act also requires digital currency exchange providers to register with the Australian Transaction Reports and Analysis Centre (AUSTRAC). It is mandatory to do so to register before offering such services in the country.
Also, the AUSTRAC is responsible for granting, revoking, and renewing registrations. To register, obliged entities must provide information about their business and key staff, such as the services provided, the business structure, financial statements, etc.
The registration is valid for 3 years, and digital currency exchange providers must renew it at the end of the period.
How can we help you implement AML/CFT requirements?
Scorechain accompanies customers from different industries and helps them to comply with AML/CFT requirements in the relevant jurisdictions.
Our powerful blockchain analytics platforms let users monitor cryptocurrency activities with risk scoring for addresses, entities, and transactions as well as risk indicators to easily spot risk-AML red flags. Therefore, users can adopt a risk-based approach to transaction monitoring and comply with the rules implemented by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
Then, with our reports (including KYA and KYT reports), users can have detailed information on addresses and transactions to facilitate the suspicious reporting process also mandated by the Act.
Would you like to learn more about our solution? Don’t hesitate to contact us for a free demo.
Tax treatment of cryptocurrencies in Australia
Australia considers cryptocurrencies as property for tax purposes.
The disposal of cryptocurrency might trigger a capital gains tax (CGT). Therefore, if an individual makes a capital gain, the gain might be subject to tax. Each type of cryptocurrency is a different kind of CGT asset.
Disposal takes place when:
- selling or gifting cryptocurrencies;
- trading or exchanging cryptocurrencies;
- convert cryptocurrencies to fiat; or
- paying with cryptocurrencies for goods or services.
For businesses, the gains will be taxable as ordinary income and not as capital gain.
Modernizing cryptocurrency regulations in Australia
In early December, Treasurer Josh Frydenberg announced in an interview with 7News that the country would implement a new framework for cryptocurrencies to adapt to the fast-changing market and crypto’s growing use. For example, it is estimated that more than 800,000 Australians have owned a form of cryptocurrency.
Frydenberg said: “Now we have digital wallets, digital currencies that are fast becoming the new norm”. Also, he added: “Our regulatory system has not stayed up to date with those digital changes”.
The framework would focus on modernizing the payment system and broadening the services and products that can be regulated while focusing on innovation, competition, and transparency. Moreover, the country would work on a comprehensive licensing framework for digital currency service providers to bring more security and certainty to Australian users.
The government is expected to publish a public consultation on the matter in 2022, as Frydenberg announced.
Lastly, Frydenberg also announced working with the Reserve Bank towards the feasibility of a central bank digital currency (CBDC).
About Scorechain
Scorechain is a Risk-AML software provider for cryptocurrencies and digital assets. As a leader in crypto compliance, the Luxembourgish company has helped more than 200 customers in 40 countries since 2015, ranging from cryptocurrency businesses to financial institutions with crypto trading, custody branch, digital assets, customers onboarding, audit, and law firms, and some LEAs.
Scorechain solution supports Bitcoin analytics with Lightning Network detection, Ethereum analytics with all ERC20 tokens and stablecoins, Litecoin, Bitcoin Cash, Dash, XRP Ledger, Tezos, and Tron with TRC10 and TRC20 tokens. The software can de-anonymize the Blockchain data and connect with sanction lists to provide risk scoring on digital assets, transactions, addresses, and entities. The risk assessment methodology applied by Scorechain has been verified and can be fully customizable to fit all jurisdictions. 300+ risk-AML scenarios are provided to its customers with a wide range of risk indicators so businesses under the scope of the crypto regulation can report suspicious activity to authorities with enhanced due diligence.
