August 5, 2015 / 8:24 AM / in 2 years

Australian inquiry says digital currencies are real money

SYDNEY (Reuters) - An Australian government inquiry will recommend treating digital currencies as money, simplifying tax for people who trade with them while forcing bitcoin exchanges to monitor customers for potential money laundering and terrorism financing activities.

Bitcoin (virtual currency) coins are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, May 27, 2015. REUTERS/Benoit Tessier

The Senate committee recommendations, included in a report to be tabled in parliament next week and obtained in advance by Reuters, underscore governments’ growing acceptance of the role of so-called “cryptocurrencies” around the world.

If implemented, the changes would align Australia with the United Kingdom and Spain by having people pay sales tax just once if they buy something with bitcoin, while leaving other nations like Sweden to fret over its true legal status.

The changes would also match Australia with Canada and Singapore, which have in the past 18 months changed their anti-money laundering and counter-terrorism financing (AML/CTF) laws to apply to digital currency and traditional currency equally.

Treating bitcoin as a tradable commodity, rather than a currency, “creates a double taxation effect that has placed an additional burden on Australian digital currency businesses,” the Senate report says, noting that Australians pay sales tax when they buy digital currency and again when they buy something with the digital currency.

“Digital currency should be treated as money for the purposes of the goods and services tax,” the report adds. It notes that all eight state governments and the Federal government must agree to any change to the country’s sales tax.

The report meanwhile calls for Australia to change its anti-money laundering and counter-terrorism finance laws to include all digital currencies. It notes that the laws as written a decade ago apply only to digital currencies “backed by a precious metal or bullion”, and not to the most popular digital currency, bitcoin.

Seven percent of the world’s $5 billion worth of supply of bitcoin is in circulation in Australia.

The change would force all digital currency companies to register with the Australian Transaction Reports and Analysis Center and run due diligence on customers, enabling “businesses to better identify and mitigate money laundering and terrorism financing risks in the conduct of their transactions”.

Digital currencies are creating just part of a broader headache for governments as they scramble to re-set their regulatory systems to cope with internet-driven disruptive technology. Online ride-share service Uber has filed a lawsuit against the Australian government claiming it should not have to pay sales tax. The government is yet to file a response.

Reporting by Byron Kaye; Editing by Simon Cameron-Moore

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