Hashbon Space: Crypto Grand Tour. Part 3 — Australia* and Oceania
We welcome you aboard our crypto world travel with the “Hashbon Space Edition” column. As you remember, last week our article was dedicated to crypto legislation in Latin America. Let’s refresh our memory with the most fascinating facts. Latin America consists of 20 countries and 14 dependent territories. Here in Argentina 18.5% of Internet users own crypto, placing them sixth on the world list of owning one cryptocurrency or another. El Salvador was the first country to accept Bitcoin rather than Ecuador where cryptocurrencies are banned.
Please set your seats back to their upright and locked position and fasten your seatbelts. Today we are going to investigate a unique region — Oceania. Have a nice flight!
To make it easier to navigate across our Crypto Grand Tour, we devote each Hashbon Space Edition to a group of countries which are united by some geographical features or have a single legal regulation.
*We reference Australia in the title because it is the biggest country in the Oceania region.
Australia and Oceania — crypto regulation in general
Oceania is a geographic region that includes Australasia, Melanesia, Micronesia and Polynesia. There are 14 independent countries and several dependent territories, here we will look at countries which made significant progress with regards to crypto regulation. According to Hootsuite’s 2022 Global Digital Yearbook, on average, 37.8% of Internet users around the world own one cryptocurrency or another. The first country from Oceania is Australia, which takes nineteenth place, where 11.1% of their Internet users own crypto. One more country from the Oceania region, which we’ll see in this list is New Zealand, placing thirtieth with an 8.8 % crypto user-base.
Countries which welcome cryptocurrency: Australia, New Zealand
Cryptocurrency in Australia has been recognized as a financial instrument and has been allowed to trade on the stock exchange. However, it does not equate to fiat money, and crypto transactions are subject to capital gains tax (CGT) and income tax. To conduct activities in the form of a crypto exchange, payment system, you must register with the Australian Transaction Reporting and Analysis Center (AUSTRAC) and obtain an australian financial services license (AFSL). There are no prohibitions on mining. Australians can pay their bills in Bitcoins.
In 2021, more than 800,000 Australians — about 3% of the population — owned virtual assets, according to Treasurer Josh Frydenberg. Bitcoin topped the ranking of the most popular cryptocurrencies among Australians, Ethereum and Dogecoin also entered the top three.
- Transactions for personal purposes are not taxed if a consumer good or service is purchased with cryptocurrency, while the size of the transaction cannot exceed 10 thousand Australian dollars.
- Exchange for another cryptocurrency or fiat, sale or gift is subject to CGT.
- The amount of tax depends on the nature and use of the asset. The Australian Taxation Office (ATO) learns the nature of the asset, the intent to purchase, the period of ownership, the frequency and volume of such transactions, the reasons for its disposal in the Know Your Customer (KYC)** verification process.
** We wrote an article about KYC, if you want to find out more information about it
There is an airport in the Australian city Brisbane, all terminals of which accept digital money as a payment method. Visitors have the option to use Bitcoin, Ethereum, Litecoin or Dash. The country has a payment system named TravelByBit, which is aimed to attract cryptocurrency tourists. Cryptocurrency transactions are exempt from value added tax. Bitcoin and Ethereum can be purchased at 1200 newsstands across the country, just scan the QR code and funds will be transferred to the user’s electronic wallet, with the minimum transaction amount being 50 Australian dollars. The country has decided on the rules for conducting an ICO, which are regulated depending on the tokens. Companies need to obtain special licenses and permits from the government, in the event that tokens do not fall under the definitions of financial products, investors will not be protected by the state.
The Australian Prudential Regulatory Authority (APRA) has published a roadmap for its plan to fully regulate the crypto industry in the country by 2025. According to this plan, APRA will gradually increase oversight of the sector over the next three years. The supervisory authority will hold consultations during 2022 and 2023, after which it will gradually introduce regulatory standards in 2024 and 2025.
In 2022 it is planned to modernize the regulatory framework related to the supervision and financial monitoring of cryptocurrencies; here’s what will change:
- The Australian government will introduce a plan for licensing cryptocurrency exchanges and a mechanism for the safe storage of cryptocurrencies.
- The ATO will develop a clearer system for taxing digital assets.
- To protect the crypto assets of Australians, cyber security standards and principles for verifying the transparency of cryptocurrency companies will be established.
- The general structure and content of the training course for specialists working with crypto and blockchain will appear.
Once the requirements are established in 2022, APRA will start generating articles in 2023. In the process, if required, it will receive additional consulting services. All payment, technology, and financial services-related regulations will be updated to bring them in line with crypto asset requirements. APRA will also begin work on prudential regulation of stablecoin payments. It likens these stablecoins to a store of value (SVF). Therefore, APRA will look for ways to include stablecoins in the regulatory framework for SVF. The Council of Financial Regulators (CFR) will also participate in this action item.
In 2024 & 2025, Entities offering services related to crypto assets are expected to conduct appropriate due diligence and comprehensive risk assessments while complying with all conduct and disclosure requirements set by the Australian Securities and Investments Authority (ASIC). APRA plans to develop and implement these operational risk standards in 2024 to include guidance on investment and lending activities, issuance of crypto assets, and partnerships with third parties. After that, the APRA plans to complete the development of crypto asset requirements and stablecoin standards by 2025 and finalize its regulatory framework.
In New Zealand, cryptocurrency is recognized as a financial instrument and is allowed to trade on the exchange stocks, but its circulation is not regulated, meaning that the legislative framework is blurry. Today, the New Zealand Inland Revenue (IRD) treats crypto assets as property and does not consider them legal tender. Only transactions that fit the definition of “financial services” and “financial products” (the latter require a license from the Central Bank) are subject to regulation.
The term “Financial Services” means:
- activity of crypto-exchanges;
The Reserve Bank of New Zealand (RBNZ) is considering developing its own Central Bank Digital Currency (CBDC). The move aims to promote a more accommodating attitude towards cryptocurrencies and offer a more secure environment for financial transactions. In the future, CBDCs can become a fast and effective way for central banks around the world to regulate the crypto space. Meanwhile, it can help protect investors from scams and shady businesses. Despite these benefits, traditional crypto advocates see it as a way for the government to take control of the market.
Cryptocurrency trading exchanges fall under the category of “value transfer services”, while exchanges that issue their own crypto assets for settlements provide services that fall under the category of “issuance and management of means of payment”. These types of activities are not subject to licensing. Crypto exchanges trading in crypto assets, which are financial products in accordance with the FMC Act, are required to have a license.
Wallet providers that provide storage and exchange services for cryptocurrencies and crypto assets fall under the category of “transfer of value services’’. If, however, financial products (various types of securities and derivatives) are accepted for storage, then it is necessary to obtain a license and comply with the requirements established by the FMC Act.
All companies that conduct activities related to crypto assets (services of which are classified as financial), are required to comply with the Law on Financial Service Providers, that is, register in the Financial Service Providers Register (FSPR).
Countries where cryptocurrency is prohibited
Legislation in Vanuatu prohibits ICOs. At the same time, however, from January 2022, holders of the VFSC License D are allowed to conduct operations with cryptocurrencies in the secondary market and consulting. The state sells citizenship for Bitcoins, the value of which comes out to approximately $130.000 USD. The Satoshi crypto paradise island, where owners of the island aim to create what they call a “crypto city” where all transactions will be carried out in digital currency. It is part of the Vanuatu Archipelago.
Countries where the status of cryptocurrencies is not determined
Nauru, Palau, Samoa, Tonga, Tuvalu, Federated States of Micronesia, Fiji, Kiribati, Papua New Guinea, Solomon Islands.
At the same time, during the last meeting of the leaders of the Pacific Islands PALM9 in July 2021, Vanuatu, the Solomon Islands, Fiji and Tonga announced that they were considering the idea of creating their own national cryptocurrencies. The Japanese company SORAMITSU then became a partner in the project.
The country plans to issue the national cryptocurrency Sovereign as a second means of payment after its fiat currency — the US dollar. In September of 2018, The International Monetary Fund (IMF) issued a statement advising the Pacific state to refrain from issuing its own altcoin, otherwise the country’s national bank could lose correspondent relations with the United States.
PS: The regulation of cryptocurrency in the dependent territories of Guam (USA), New Caledonia (France), Western New Guinea (Indonesia) is carried out in accordance with the laws of the metropolitan countries.
Congratulations! We landed at Hashbon Airport. Together we had a wonderful trip across the Oceania region. Hope you will not forget your body of knowledge that we’ve filled today. Thank you for the educational flight, yours captain for today was Wise Raccoon.