Digital currencies have evolved significantly in a relatively short period of time, and with users all over the world it is perhaps unsurprising that such expansion has seen anomalies where existing laws fail to deal with cryptocurrencies fairly. After a lot of pressure from within the industry, the Australian Government has acknowledged such an issue that resulted in double taxation on Bitcoin selling, and are currently drawing up new legislation to address it.
This is not an isolated situation, and digital currencies have found themselves penalized by legislation in many jurisdictions, but does this have to be the way and can anything be done?
Read the full story below.
There are many advantages for digital currencies operating outside of the traditional fiat currency structure. Blockchain technology and the secure, anonymous but fully traceable structure of cryptocurrency transactions offer a very different environment to traditional finance, and have provided a platform that is particularly suited to the online marketplace we take for granted today.
However, the ad-hoc nature of the cryptocurrency development over the last five years has seen rapid user base expansion, but also no real effort to uniformly integrate into existing financial structures. The downside to this is that in some situations, local laws make using digital currency difficult, or in some cases penalizes such use harshly.
One such situation is Australia, where Bitcoin is currently classed as a form of barter rather than a form of currency when it comes to local tax legislation. For Australian businesses that sell digital currencies, a local goods and service tax (GST) is payable on the sale, and are liable for tax if they receive them as well. In essence, digital currency sellers are paying tax twice on their transactions due to the current legal classification of cryptocurrency. The government have listened to the industry though, and are currently looking at legislative amendments that would redress the issue, a move that the Australian startup community believes will help them to remain competitive within the global market.
This shift in attitude is welcomed from the Australian government, and shows a recognition that being able to compete in the cryptocurrency market is important for local businesses and good for the economy long term. However, this change has not happened yet and the admission from the government this was an issue did not happen overnight. Pressure from the industry has caused the government to take notice, and that is something that must be repeated in other jurisdictions where similar or more problematic issues remain. It is up to users and startups within the industry to pressure local governments to address such situations wherever they occur to ensure that digital currencies have the best chance of longer term success.
Evolving outside of government control has brought benefits to digital currency, but also leads to local issues that are acting as a barrier to entry for potential users, and dealing with these kinds of issues is imperative if the digital currency is to continue its user base expansion.