Digital currency held back by outdated regulation

Embrace technology or risk being sidelined

Digital currency takes hold

Digital currency takes hold

The Australian Digital Currency Commerce Association is reinforcing calls for the adoption of digital money – warning that Australia risks being sidelined by outdated regulation.

This renewed warning came from the Australian Digital Currency Commerce Association (ADCCA) chairman, Rod Tucker, who said that more clarity is needed to “unshackle” Australia from layers of bureaucracy and regulation.

Referencing recommendations in the Murray Report, he noted that broadening licensing and document verification will open up opportunities in the nascent digital currencies sector.

Industry support for bitcoin, the online peer-to-peer payment system, coincides with an Australian senate inquiry into this form of transaction. A final report is expected in March 2015.

Details about this Senate Inquiry are available online. This inquiry has received wide-ranging submissons from the public and private sectors.

Bitcoin is stable, secure, transparent, and here to stay, said Tucker. This widely-accepted transaction platform will lead the way in the development of consumer safety, including digital identification.

“We welcome the (Murray Inquiry) recommendations to develop a national identity strategy, which if implemented, would cut down on e-fraud, boost consumer confidence and reduce compliance costs.”

Wider acceptance

Among the users of bitcoin, Flinders University now accepts it as payment for one of its courses. Bitcoin ATMs are being rolled out in Sydney, Melbourne and Canberra and more companies are accepting this currency.

Australia’s regulatory framework for digital currencies needs fine-tuning, including tax laws, the broader economic implications and potential for illicit activities.

However, Tucker noted that this emerging sector needs a level playing field supported by innovation and marketplace competition.

In other news, the Australian Securities and Investment Commission (ASIC) noted that bitcoin was developed as an alternative to traditional currencies that are legal tender in a particular place.

An ASIC submission to the senate inquiry highlighted global uncertainty around the treatment of digital currencies. “Much of this uncertainty stems from the fact that digital currencies are a relatively new development and current legislation was typically not designed with digital currencies in mind.”

Licensing

At present, digital currencies are not classified as financial products in Australia. This may imply that an operator does not need a licence to operate a digital currency trading platform.

But if digital currencies are classified as financial products, a platform operator may need to hold an Australian market licence, unless covered by an exemption.

More broadly, ASIC said this regulatory body may not need to regulate exchanges. This is largely because crypto-currencies are bought and sold immediately, for specific prices and during a sale.

“As a result, the buying and selling of digital currency and operation of an exchange on which it can be bought and sold are generally not financial services or financial markets.”

Intangible asset

The Australian Taxation Office earlier classified bitcoin as a “form of intangible property.” This is neither money nor currency but more akin to barter, the ATO’s deputy chief tax counsel, Jonathan Woodger, observed in a submission to the senate inquiry.

The ATO’s assessment of the financial risk around bitcoin is seen as being low. There are currently 13.54 million bitcoins in circulation.

The worldwide asset value is capped at around $AUS 9.96 billion. By comparison, Australia’s GDP in 2012-2013 was $AUS 1.5 trillion.

Compliance risks associated with crypto-currency would be similar to those involving a cash economy. That is the capacity for transactions to be handled “pseudo-anonymously or simply go unreported," the ATO said.

Follow Shahida Sweeney on Twitter: @ShahidaSweeney

More about Australian Securities and Investment CommissionAustralian Taxation OfficeFlinders University

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