holds the view that bitcoins are neither money nor foreign
currency, and the supply of bitcoins will not attract GST. However,
bitcoins are an asset for CGT purposes. In effect, paying for goods
and services by bitcoin will be regarded by the ATO as a barter
transaction. This treatment is broadly similar to the treatment
overseas, with the
UK and US both
treating bitcoins as property for taxation purposes.
As noted above, many countries have determined that bitcoins are
to be treated as property, not currency, for the purposes of
taxation laws. But there are some significant differences in how
the product is regulated around the globe. China has prohibited
financial institutions and payment companies from handling bitcoin,
but individuals are able to hold and trade them. The EU does not
have a unified position but Germany has recognised a bitcoin as a
'unit of account' (which means that it is a financial
instrument and can be used as a settlement currency). Similarly to
the UK, profits on trading bitcoins are taxed.
In January 2015, Coinbase in the U.S. launched the first
licenced U.S. bitcoin exchange. This is a move away from
unregulated online exchanges that are more vulnerable to collapse
Mt Gox) and towards making bitcoin a more regulated,
conventional financial instrument.
The future of digital currencies in Australia
ASIC has suggested that the law could be altered to accommodate
digital currencies, for example by treating the digital currencies
in the same manner as national currencies or by declaring digital
currencies to be 'financial products'. We anticipate that
bitcoins will have to be re-evaluated by regulators in the future
if they continue to gain in popularity. If bitcoins become a
ubiquitous medium of exchange, then there may be a greater push to
regulate them in a similar way to foreign currency. If this occurs,
then most dealings relating to bitcoins may need to be
As bitcoin increases in visibility and volume, the trend will be
to increase regulation and oversight of the platform and to ensure
that it does not cause leakage of tax revenues. In doing so,
bitcoin may lose connection with its libertarian, anonymous roots.
The tensions between these two opposing visions for
crypto-currencies will bear watching.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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