The crypto industry voiced its displeasure with Australia’s decision to continue taxing digital currencies as assets rather than foreign currency. Australia’s budget for October 2022 is now available. The Australian government presented its budget on October 25.
The Australian government intends to introduce legislation to clarify the status of digital currencies such as Bitcoin as assets. It implies that investors must pay capital gains tax on their earnings when they sell cryptocurrency through exchanges or engage in digital asset trading.
According to the budget papers:
“This maintains the current tax treatment of digital currencies, including capital gains tax treatment where they are held as an investment”.
The Australian government has stated that it will reconsider how to regulate the cryptocurrency industry. Furthermore, the Treasury will “token map” the Australian crypto industry, which will be a first for the government. Token mapping is the process of identifying the characteristics of each digital token available in the country. The new law will take effect for tax years beginning on or after July 1, 2021. However, the budget papers state unequivocally that any digital currency created by the government would be subject to foreign currency taxes.
Since 2018, over a million taxpayers have dealt with the cryptocurrency ecosystem, according to the IRS. Furthermore, the Reserve Bank of Australia is launching a “ring-fenced” pilot program to investigate how Australian consumers and businesses can use digital money.
Australia is Taxing and Creating a CBDC
According to the Australian government’s budget release, the legislation removes the uncertainty that arose after El Salvador declared Bitcoin legal tender in September of last year. However, Australia stated that central bank digital currency (CBDC), or government-issued cash, would be considered foreign money.
— Reserve Bank of Australia (@RBAInfo) March 29, 2022
Mitchell Travers, the founder of the blockchain consulting firm Soulbis and a former cryptocurrency exchange operator, claimed that the budget adjustment was ambiguous and appeared to conflict with government research into the viability of a CBDC. Travers believes that the government would be foolish to take an enforcement approach in the early stages of taxing crypto assets.
Furthermore, given the Treasury’s concurrent investment in attempting to transition the existing technological systems that underpin our financial system to digital assets. He went on to say that it would be ironic to tax digital assets while simultaneously launching their CBDC without specifying which tokens fall under which tax classification.
Australia and the Crypto Industry
El Salvador, which made Bitcoin legal tender last year, has suffered significant economic losses as a result of the precipitous drop in cryptocurrency values. However, the adoption of bitcoin remains low, and the currency’s value has decreased significantly rather than increased.
According to Caroline Bowler, CEO of BTC Markets, an Australian cryptocurrency exchange, Australia has been taking a step back and assessing what happened in El Salvador and the price of bitcoin for a long time. She went on to say that Australia may lag behind other countries in pursuing a more open-minded strategy.
“Unless we look at proportional, responsible regulation, all of these trading partners will be pulling ahead of Australia.”
Bowler believes that Europeans will gain ground because the United Kingdom now has a prime minister who is familiar with central bank digital currencies.
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