The Australian Transaction Reports and Analysis Centre (AUSTRAC) has released an announcement entitled “Are you a digital currency exchange provider?”
The message in the document is that the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017, passed on the 13th of December, is to come into force on the 1st of April and will cover cryptocurrency-based entities.
AUSTRAC is the Australian government’s financial intelligence agency. It was set up in 1989 to monitor financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism.
The amendment to the law will require cryptocurrency operators to register with the financial regulator (ASIC) and keep records of the identities of their customers. They will need to maintain an AML/CTF program, which requires that they report suspicious behaviour to the authorities.
The anti-money laundering and counter-terrorism financing rules will be available for public consultation until the 13th of February, according to the announcement.
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This is a key development in the acceptance of cryptocurrency into the Australian financial establishment. The country has been losing a lot of business to its Asian neighbours because of the suspicion with which the establishment has often met the new industry.
Recently, we reported that a number of Australian banks were blocking cryptocurrency-related transactions, and even closing accounts on the basis that they were being used to this end. In fact, the Australian Competition and Consumer Commission was investigating banks back in 2015 for their part in forcing several Bitcoin startups out of business. They were apparently colluding with each other to stamp out the emerging competition, according to the Australian Financial Review.
In addition to that, until the end of 2017 cryptocurrency users had been paying double tax on their coins. This was the result of a loophole which saw users paying a 10% goods and services tax upon the purchase of digital currency, and then again upon its use in further transactions.
This situation was somewhat at odds with the government’s desire for the country to be seen as a financial technology centre. In May, the government announced that the law was to change, saying: “The Government is committed to establishing Australia as a leading global financial technology (fintech) hub and is announcing a new package that aims to position our local fintech industry as a world leader,” according to Cointelegraph.
The double taxation finally ended in September, retroactively applied to July. The accompanying government statement read: “The bill will ensure that Australians are no longer charged GST on purchases of digital currency, allowing it to be treated the same way as physical money for GST purposes.”
This is significant because it meant that cryptocurrency is to be treated as money rather than a commodity. However, this also means that it will have to operate under the same legal obligations as any other kind of money. Gains must be taxed, which is something that the government is working on at this very moment, and fundraising must be done legally – in September, the Australian financial regulator (ASIC) helpfully provided ICO operators with guidelines regarding their legal obligations in the country. ASIC Commissioner John Price said: “We want to ensure innovative firms understand the regulatory framework they may be operating under and ensure they meet any obligations they may have when raising funds in Australia.”