The Australian Senate Economics Reference Committee released its long-awaited report into the digital currencies on 4 August 2015. Digital currencies and blockchain technology is hot news. For many, the blockchain sensation is reminiscent of the early days of the internet. We have even seen trialling of blockchain technology and some bitcoin sector investment by Australian banks. The big question has been whether, and if so, how, to regulate this burgeoning technology without suffocating it in the process.
The Australian Senate Committee was given the significant task of considering the potential impact of digital currency technology on the Australian economy and how Australia could take advantage of this technology to establish itself as a market leader in the digital currency industry.
The Senate Committee’s report, Digital currency – game changer or bit player? is a significant step forward in developing the conversation around this new technology and its interaction with established payment and remittance networks. After considering submissions from industry associations, government regulators, digital currency exchangers and users, the Report made the following recommendations:
- Significantly, digital currency should be treated as money for the purposes of goods and services tax. This reverses the Australian Taxation Office position and should remove this 10% tax disincentive for digital currency businesses in Australia. The Committee also recommended further examination of the appropriate tax treatment of digital currencies in the Taxation White Paper process, with particular regard to income tax and fringe benefits tax.
- Digital currency exchangers may need to comply with anti-money laundering requirements. The Report recommends that the Attorney-General’s Department review of Australian anti-money laundering and counter-terrorism regime should consider applying that regime to digital currency exchangers. This recommendation is consistent with the June 2015 FATF recommendations on virtual currencies.
- A Digital Economy Task Force should be established. This is part of the “wait and see” element of the Report, allowing for the gathering of further information on the uses, opportunities and risks associated with digital currencies. This will enable regulators, such as the Reserve Bank of Australia and ASIC, to monitor and determine if and when it may be appropriate to regulate certain digital currency businesses.
- Self-regulation. The committee supports the Australian Digital Currency Commerce Association’s continued development of a self-regulation model, in consultation with government agencies.
The Senate Committee’s Report is an important positive step towards the integration of digital currency technology into Australia’s economic and regulatory framework. Members of Norton Rose Fulbright’s global cryptocurrency team have worked with ADCCA is exploring the self-regulatory model and drawing on the firm’s experience of UK, US and Canadian regulation in this sector. No doubt, this Report will generate much debate on how Australia should tackle the rise of digital currency technology as a positive disruptor in Australia’s economy.
