Australia to Tax Crypto as Asset Class, Not Foreign Currency

The Australian government announced its 2022-23 budget yesterday. As per the announcement, crypto and digital assets will not be taxed as foreign currencies, but as an asset class. This is also the first time, crypto and digital assets have made their way into the Australian budget, a testament to the growth of the asset.

The government said that it would introduce laws to codify the treatment of virtual currencies like Bitcoin (BTC) as assets. The budget paper stated that crypto transactions are subject to capital gains tax when making a yearly profit and using centralized exchanges.

Although digital assets will be taxed as an asset class, CBDCs (Central Bank Digital Currencies) will be treated as foreign currencies. Moreover, Australia’s central bank is looking into its own CBDC, eAUD. They plan to launch a pilot project in January 2023. A majority of central banks throughout the world are now using or researching CBDCs. The majority are attempting to avoid falling behind Bitcoin and other cryptocurrencies but they are having trouble due to technological challenges.

Is the Crypto Community happy with the Australian Budget?

Many expressed disappointment regarding the Australian governments’ decision to continue taxing crypto as an asset class.

The budget shift, according to Mitchell Travers, the founder of blockchain consulting firm Soulbis, is ambiguous and appears to be at odds with government research into the sustainability of a CBDC.

Travers stated,

“It would be ill advised for the government to really take an enforcement approach to the taxation of crypto assets in its early stages, especially considering the fact that the Treasury is also investing in trying to migrate the traditional technology systems that back our financial system over towards digital assets.” 

The Australian crypto market is largely unregulated. The Treasury was set to prioritize “token mapping.” This would help determine how crypto assets and related services should be regulated.

All the tax efforts and regulatory efforts are proof that the crypto space has taken the world by storm. Governments can’t get the new asset out of their heads. Moreover, no one wants to be left out.

At press time, the global crypto market cap stood at $1.02 trillion, up by 5.6% in the last 24 hours.