Crypto Reforms: Change In Consultation Approach
According to the latest ASIC report into retail investors, the uptake in cryptocurrency has skyrocketed among Australian retail investors. It found that 44% of those surveyed reported holding cryptocurrency, making it the second most common product type held after Australian shares. At the same time, a quarter of the surveyed investors who held cryptocurrency also indicated that cryptocurrency was the only investment they held.
With this increase in the uptake of cryptocurrency and other related blockchain technology, coupled with the lack of regulation which has allowed scams to proliferate, it will perhaps come as no surprise that the ACCC has estimated that more than $100m had been reported lost to cryptocurrency investment scams just in the first half of 2022.
In a bid to stamp out these scams, the previous government had commissioned the Board of Taxation to conduct a review into the appropriate policy framework for the taxation of digital transactions and assets in Australia. This review was to focus on the scope of digital transactions and assets without increasing the overall tax burden. Specifically, it was asked to consider:
the current Australian taxation treatment of digital assets and transactions and emerging tax policy issues;
the awareness of the taxation treatment by both retail and wholesale investors and those transacting in digital assets as part of their business;
the characteristics and features of digital assets and transactions in the market, including the rapid evolution of technology supporting the broader digital asset ecosystem;
the taxation of digital assets and transactions in comparative jurisdictions and consideration of how international experience may inform the taxation of digital assets and transactions in Australia; and
whether or not any changes to Australia's taxation laws and/or their administration are warranted in the context of digital assets and transactions, both for retail and wholesale investors.
Various public consultation dates in September 2022, both in person and virtual, have also been announced by the Board of Taxation in relation to the review, with submissions closing on 30 September 2022. The Board is due to report back to the government by the end of 2022.
However, the Albanese Government has recently criticised the previous government for "prematurely jump[ing] straight to options without first understanding what was being regulated". According to the Assistant Treasurer and Minister for Financial Services, this government is seeking to take a "more serious approach to work out what is in the ecosystem and what risks needs to be looked at first".
As a part of this new approach, Treasury will prioritise "token mapping" work as the first step in a reform agenda. This aims to identify how cryptocurrency assets and related services should be regulated. The next steps in this process will be to identify notable gaps in the regulatory framework, progress a licensing framework, review innovative organisational structures, look at custody obligations for third party custodians of cryptocurrency assets and provide additional consumer safeguards.
Treasury will be commencing consultation with stakeholders on a framework for industry and regulators soon by the release of a public consultation paper on "token mapping". While the Board of Taxation review was not addressed by the government, it is assumed the review as previously announced will continue.
Want to participate in the consultation?
If you have had experiences with cryptocurrency, either positive or negative, and would like to contribute to these consultations, we can assist in writing your submission or just keeping you informed about when consultations will start.