The explicit mention of cryptocurrency in Australia's federal budget helps provide clarity on how digital assets will be handled in the country, industry observers said.
The budget presented Tuesday reiterates June's announcement that bitcoin won't be treated as a foreign currency for tax purposes. It also appeared to clarify that the country won't follow El Salvador's example of allowing the cryptocurrency to be used as legal tender.
“This may be the first time cryptocurrency has been mentioned in the federal budget papers, which is a sign of the rising adoption of cryptocurrency," said Michael Bacina, a partner at law firm Piper Alderman.
The statement, which follows consultations by the Board of Taxation, means the current tax treatment of digital currencies remains and that capital gains tax will continue to apply to crypto assets held as investments. It complements an August decision to use token mapping as a framework for regulation in an effort to bring clarity to the largely unregulated sector. Token mapping involves uncovering the characteristics of digital assets to identify how they should be regulated.
"The decision was expected but it creates further clarity and certainty which will help with trust and further adoption," said Holger Arians, CEO of Banxa, an Australia-based fiat-to-crypto exchange.
El Salvador's decision to allow bitcoin as legal tender "has the potential to create uncertainty about the status of crypto assets such as bitcoin for tax purposes in Australia," the budget said. "This clarification will deliver a consistent tax requirement for crypto asset holders."
It's important the government recognizes that it shouldn't lump all digital assets "into one basket, as they are extremely varied," said Talis J. Putnins, a crypto researcher at the University of Technology Sydney. "Legislators need to keep in mind that digitization and tokenization is a technology not an asset class."
"The token mapping exercise, coupled with the review of the Board of Taxation has the potential to be instrumental in the development of confidence in our regulatory frameworks," said Steve Vallas, the former CEO of Blockchain Australia and a senior technology adviser to investment firm Skafold. "It is unlikely we will be afforded an opportunity to get this right a second time around."
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.