Australia Introduces Cryptocurrency Exchange Regulations

  • Australian cryptocurrency exchanges will need to register and report to AUSTRAC
  • The new regulations are already in effect. Failure to comply will lead to "civil penalty consequences."

Australia has just implemented new regulatory obligations cryptocurrency exchanges will need to comply with. A recent announcement published by the Australian Transaction Reports and Analysis Centre (AUSTRAC) reveals the regulator is pushing against money laundering and seeking to bring forward counter-measures agaisnt terror financing. 

The announcement comes a week after the Australian Taxation Office (ATO) revealed it was seeking public consultation from citizens regarding how it should approach "specific tax events." Specifically, the ATO was looking for the public's views on cryptocurrency taxation, as it "launched a community consultation to help us understand practical issues experienced when complying with cryptocurrency tax obligations.”

According to AUSTRAC, cryptocurrency exchanges will now need to:

  • Adopt and maintain an AML/CTF program to identify, mitigate and manage money laundering and terrorism financing risks
  • Identify and verify the identities of their customers
  • Report to AUSTRAC suspicious matters, and transactions involving physical currency of $10,000 or more
  • Keep certain records for a period of seven years.

The legislation has been in effect for cryptocurrency exchanges since April 3, for a trial period of six months, which will help measure their success and relative impact on the market for users. During the six-month trial period, AUSTRAC CEO will only take action if exchanges don't take "reasonable steps" to comply.

At the end of its announcement, AUSTRAC notd:

"There will be criminal offence and civil penalty consequences if you provide digital currency exchange services without being registered."

AUSTRAC

Cryptocurrency exchanges are being urged to register, presumably to improve their level of accountability within the marketplace. Australia is also incorporating 'transitional registration arrangements' for crypto exchanges, which will come into effect on May 14. These arrangements will allow existing exchanges to continue trading, while transactions and applications are screened for legitimacy.

Tax Deadline Approaching for Crypto Investors: Interview With BitTaxer President Brennan Snow

Avi Rosten

Brennan snow card.png

“In this world nothing can be said to be certain, except death and taxes.”

Unfortunately, the same can be said for the world of crypto. While 2017 and 2018 saw investors make unparalleled gains (and losses) - taxes now have to be calculated, and for those in the US, the tax deadline is rapidly approaching.

We spoke with Brennan Snow, president and co-founder of BitTaxer - a company that makes it easy to file your crypto taxes. With a degree in Information Systems Security, Brennan has been working in the proprietary software space for over 13 years in corporate and startup environments, before he noticed the lack of tax resources for crypto investors. We talked about why he started BitTaxer, tax regulation and the IRS, and whether more states will start accepting taxes in crypto.

When did you found BitTaxer and why?  

We founded BitTaxer in late 2017, and into early 2018. Being crypto traders ourselves, my partner Wes and I looked at the market at the time and saw only a few viable options available, and were not happy with what was available. Each we felt lacked an intuitive workflow. We also felt that no one was doing a good job addressing the entire scope of the tax code in the US, as it seemed only Capital Gains and Losses (trade implications) were being focused on in the competitive apps we reviewed. Lastly, we found that all of the apps appeared to be geared toward individual users, instead of tax professionals. When we reviewed the available data, and found that only 600 or so people filed crypto taxes in 2016, we knew we had to do something to help those tax professionals, who account for over 60% of aggregate tax returns filed in the US, as it was our sense that they were not being served by the available offerings in the market. This was the onus for creating BitTaxer; to create an easier way to do things for individuals, and to create a tool suitable for tax professionals.

Do you imagine the IRS will start 'cracking down' on crypto traders?

I think we've already begun to see the writing on the wall in this regard in the US. With Gemini and Coinbase each providing data to the IRS relative to accounts that meet a certain threshold of activity, I think it takes very little imagination to picture that threshold being revised down to provide the ability to scrutinize a larger set of users. Since the exchanges appear to be willing in their cooperation with the authorities, I suspect this effort is being spent as a precursor to some activity planned subsequent to the filing deadline.

Do you think exchanges are making it easy enough for users to calculate their taxes?

This is a very tricky question to answer. The short answer is no, for the following reason(s). I think that exchanges are in kind of a tough spot. While they can, and some already have, started to provide tax information via their reporting tools, that information is only useful in a vacuum.  If users have traded on other exchanges beyond the one which provides the report for them, then the report provided by the exchange will no longer be of value, as the statistics will no longer have proper cost basis tracking. In order to support this properly/accurately, exchanges would essentially have to provide import/integration support for competitive exchanges, to allow users to import their history from those other locations, and this is something I don't see happening anytime soon for obvious reasons. I don't see exchanges easily/willfully giving oxygen to their competitors, as it works against their interest.

Do you think the US has introduced sensible laws regarding cryptocurrency taxes?  

While we try not to get too involved in the politics of legislative matters that pertain to our space, I can say that I think things are moving in the right direction.  As it stands currently, I think it's going to be tough to convince people to transact using cryptocurrency when each purchase made can have a capital gains implication. On the flip side, there was some clarity given in the 2018 tax bill as it pertains to like-kind exchanges and malicious losses, and lawmakers are beginning to introduce more legislation in the congress as they begin to understand the utility and potential in the cryptocurrency market. It seems a bit Byzantine as it stands currently, but having seen incrementalism at play in our government over the course of my lifetime, the fact that it remains a topic of conversation among legislators is encouraging.

Do you think more states will allow you to pay taxes with Bitcoin, like Ohio has done?  

I think Ohio will be an interesting case study that a lot of other States will be looking at. As making payment in cryptocurrency is still a taxable event, I suspect that there will be quite a few people for whom this benefits (the taxable event triggers a loss), and quite a few who end up with a gain they owe tax on in the subsequent year. I think the decreased volatility we've seen since around April 2018 (with a few exceptions) makes it a more viable option for municipalities, as they have less to be concerned with in terms of rapid depreciation of their tax revenues, as I'm sure this has to have been a concern for others in the past. All the same, I think it's an amazing step toward greater adoption and recognition, so the optimist in me would love to see that take place.

What’s on your roadmap for 2019?  

2018 has been such an amazing year for us at BitTaxer. Our community has grown exponentially, we've made some extraordinary partnerships, and we've gotten tremendous feedback from our community. I think the rest of 2019 will find us working to develop some of that feedback we received, working to integrate more exchanges into our offering, and finding new ways to add value for our community.