The federal government should hold off on classifying crypto currencies such as Bitcoin as financial products, a parliamentary committee has recommended.
The Senate committee established last October had been asked to consider a range of taxation and regulatory issues raised by the emergence of digital currencies.
While the committee recommended that digital currencies be treated as money for GST purposes, it warned the government to take a “wait-and-see” approach before regulating digital currencies like conventional financial products and payment services.
In its report tabled in parliament today the committee wrote that such regulation would be premature and could stymie the digital currency industry’s development in Australia.
Instead, it recommended that the government consider establishing a taskforce to further investigate the opportunities and risks involved with digital currencies and support a self-regulatory model in the meantime.
If accepted by the government, the recommendations mean that Bitcoin is unlikely to be subject to regulatory requirements of the Corporations Act.
In its report the committee referred to evidence by Australian Securities and Investment Commission (ASIC) senior executive Michael Sadaat who warned of the difficulties of regulating crypto currencies.
“I think the difficulty in regulating the trading platforms like traditional markets is that the compliance obligations that are associated with running a traditional financial market are quite high. The bar is set quite high. I think it is likely that if you were simply to apply the existing framework to platforms that sell digital currency, most would find it uneconomic to sustain in Australia. And because the market for these bitcoins is global, a lot of that activity would move offshore and Australian consumers would probably still end up being able to speculate with digital currency by buying and selling on foreign trading platforms,” Mr Sadaat told the committee.
The committee also referred to evidence vocal Bitcoin expert and author Andreas Antonopoulos gave to the inquiry in its report.
“We do not really know where Bitcoin coin will be in a couple of years, in terms of whether it will be used primarily as a long-term store value—akin to a digital gold—for transactions involving large parties or, as I would like to say, the kind of currency used to buy aircraft carriers with, or if it will turn into a currency that is used for micro-transactions and retail transactions and consumer online commerce—the kind of currency you use to buy a cup of coffee—or perhaps fill in both of those at the same time. There are many unanswered questions at the moment,” Mr Antonopoulos told the committee.
While the committee recommended sparing digital currencies from being classed as financial products it strongly recommended that they be subject to controls under the government’s Anti-Money Laundering and Counter Terrorism Financing laws.
Want to know more?
Why not become a CSO member and subscribe to CSO's mailing list.Read more: More information sharing on cyber threats, says Abbott
Get newsletters, updates, events and more right here