Cryptocurrency regulation in Australia: Pains and Gains

We start this analysis with an unusual positive: cryptocurrency regulation in Australia is moving in the right direction, and the latest legislative developments regarding cryptocurrencies should be welcomed by the general public as a step in the right direction.

Offering protection to crypto consumers and investors, and providing legal certainty to blockchain-related businesses – without extinguishing the fire of blockchain innovation and adoption – is an incredibly hard thing to do, and the Australian authorities seem to be very active and willing to achieve this balance.

The Land of Plenty may not be the biggest player in the game, but it sure is a significant one. Let us take a look at Australia’s regulative approach to ICOs, cryptocurrency exchanges, and tax treatment of cryptocurrencies.

ICO regulation

The Australian Securities and Investments Commission (ASIC) is ahead of the game when it comes to cryptocurrency regulation in Australia. Set up under the 2001 ASIC Act, the Commission’s principal job is to enforce and give effect to the Corporations Act, as well as maintain, facilitate, improve, monitor and regulate the performance of the Australian financial markets and the entities in it.

In September 2017, the ASIC published an information sheet (INFO 225) that gives guidance regarding the potential application of the Corporations Act to entities considering crowdfunding through an ICO.

According to the ASIC, the laws applicable to crypto-assets or ICOs depend on whether the crypto-asset or ICO is a financial product. The general definition of a financial product under the Corporations Act is “a facility through which, or through the acquisition of which, a person does one or more of the following: (a)  makes a financial investment, (b)  manages financial risk, and (c)  makes non-cash payments.”

Therefore, ICOs and crypto-assets that are considered to be financial products are subject to the Corporations Act and under the jurisdiction of the ASIC, while ICOs and crypto-assets that are not financial products are regulated under Australian Consumer Law.

That being said, the ASIC has clearly stated on numerous occasions that it does not consider bitcoin, ether or other similar cryptocurrencies as financial products. Furthermore, the ASIC maintains that the legal status of ICOs and crypto-assets depends on the structure, operation, and the rights attached to the tokens offered in the ICO, and that merely describing the tokens issued as “utility tokens/digital currency” does not mean they’re not financial products.

Source: Cryptocurrency Regulation In Australia: Pains And Gains | Crypto Briefing