I admit that bitcoin (and cryptocurrencies generally) hold a fascination for me, mainly because I can’t get my mind around how they work. Hence, because of this – and also because, frankly, I can’t see what’s in it for me! – my inclination has always been to stay well away from any cryptocurrency!
However, bitcoin has been quite prominent in the news of late, because its price nearly got to the US$20,000 barrier, before falling back to around US$10,000.
Apart from the volatility in the value of bitcoin, a reason for having no regrets is that the tax implications of dealing with cryptocurrencies are complex. Although GST seems not to be a big issue, as the ATO accepts that digital currency is a method of payment, capital gains tax may be involved. There are also potentially issues under the anti-money-laundering laws. So the news that the tax office is getting set to “blitz” investors in bitcoin (and other cryptocurrencies) shouldn’t come as any surprise.
Of course, anonymity is prized by some holders of bitcoin (who see it as a currency without a central bank), but it seems that the authorities have a number of weapons at their disposal, including Austrac’s powers to gain information from digital currency exchanges along with requirements for customer identification. Combined with the with the ability to obtain similar information from other jurisdictions under double-tax treaties (for example, the US and Japan), it seems that at least some of bitcoin’s perceived “benefits” might not be quite as significant as some of those who are involved in it might wish.
As I’ve stated, I don’t pretend to understand how cryptocurrencies work, but my imprression is that, although bitcoin transactions (being a blockchain) can be “peer-to-peer” without the need to go through an exchange, transactions involving the purchase of bitcoins, or their conversion back into currency, usually need to be done on an exchange, and it is at this point that the authorities appear to have the ability to watch what’s occurring.