Thursday, 21 October 2021 17:40

Senate panel recommendations on digital currencies welcomed Featured

Senate panel recommendations on digital currencies welcomed Image by Tamim Tarin from Pixabay

The chief executive of a cryptocurrency marketplace has welcomed the recommendations of a Senate inquiry into taxation, licensing and regulations to cover digital and cryptocurrency businesses in Australia.

The Select Committee on Australia as a Technology and Financial Centre, chaired by Liberal Senator Andrew Bragg, released its final report including a list of recommendations on Wednesday night and Cointree chief executive Shane Stevenson said it was good news for cryptocurrency traders and exchanges.

The inquiry recommended that the government set up a market licensing regime for digital currency exchanges, including capital adequacy, auditing and tests to determine the integrity of a person entering the business.

Said Stevenson: "The introduction of a formal licensing regime is a big step in shifting the mindset of Australia’s investment community away from viewing cryptocurrency as a speculative investment trend, and toward viewing it as a legitimate asset class with a broad role in modern portfolios.

“Most of Australia’s exchanges and funds operate with access to a licensing regime which aims to hold an industry to a professional standard and weed out any undesirable players in the space, and this will be the same for crypto. Legitimate exchanges and traders will benefit from this development.”

The inquiry also recommended that decentralised autonomous organisations be recognised under the Corporations Act.

A DAO generally uses blockchain technology to provide a secure digital ledger to track financial interactions across the Internet, hardened against forgery by trusted timestamping and dissemination of a distributed database, according to Wikipedia.

This approach claims to remove the need to involve a mutually acceptable trusted third party in a financial transaction, thus simplifying the transaction.

The inquiry also recommended a change in the capital gains tax regime so that digital asset transactions only created a CGT event when there was a clearly definable capital gain or loss.

“The ATO has already taken a position on how it considers cryptocurrency in regard to capital gains, but the conversation around how to demonstrate and evaluate a capital gain or loss in regard to cryptocurrencies can be tricky, particularly with such aggressive price movements that some coins are still experiencing,” said Stevenson.

“We strongly support deeper investigation into how cryptocurrency ought to operate in regard to the Australian taxation system, and advocate for clarity to investors, with many taking taxation into account when developing an investment strategy or planning for retirement.”

Given the extent to which mining digital currencies consumes electricity, the inquiry recommended that businesses which undertake digital mining should receive a 10% company tax discount if they generated their own renewable energy for mining.

Stevenson said: “There’s such a huge amount of capital in the cryptocurrency space and as that capital flows towards investments in green energy, it will help Australia achieve net zero emissions much faster. We’ve already seen this trend with Macquarie Group piloting a green bitcoin mining project.

“We’re almost certain to see more power consumption from cryptocurrency mining as available coins start to run out, and the computational equations that need to be solved become more complex. The impact that this has on energy consumption and climate change must be considered in all policy."

Other recommendations:

  • The government was urged to set up a custody or depository regime for digital assets with minimum standards under the Treasury portfolio;
  • The Government, through Treasury and with input from other relevant regulators and experts, was urged to conduct a token mapping exercise to find the best way to characterise the various types of digital asset tokens in Australia;
  • The Anti-Money Laundering and Counter Terrorism Financing regulations needed to be clarified to ensure they were fit for purpose, did not undermine innovation and gave consideration to the driver of the Financial Action Task Force "travel rule";
  • Treasury was urged to lead a policy review of the viability of a retail Central Bank Digital Currency in Australia;
  • The government was urged, through the Council of Financial Regulators, to enact the recommendation from the 2019 ACCC inquiry into the supply of foreign currency conversion services in Australia that a scheme to address the due diligence requirements of banks be put in place, and that this be in place by June 2022;
  • In order to increase certainty and transparency around de-banking, the government was urged to develop a clear process for businesses that have been de-banked. This should be anchored around the Australian Financial Complaints Authority which services licensed entities;
  • In accordance with the findings of Scott Farrell's recent Payments system review, common access requirements for the New Payments Platform should be developed by the Reserve Bank of Australia, in order to reduce the reliance of payments businesses on the major banks for the provision of banking services; and
  • The government was urged to establish a Global Markets Incentive to replace the Offshore Banking Unit regime by the end of 2022.

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Sam Varghese

Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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