ICO Regulatory Landscape: Oceania

ICO Regulatory Landscape: Oceania

Jul 27, 2018

Australia

August 20, 2014. The Australia Taxation Office issued a guidance paper and a draft ruling on the tax treatment for cryptocurrency in the country.[1] The ATO’s position is that cryptocurrency such as Bitcoin is neither money nor a foreign currency, but property and an asset for capital gains tax purposes. Therefore, it may be subject to Capital Gain Tax, Good and Service Tax, Income Tax and/or Fringe Benefit Tax and record-keeping requirement, depending on whether it is for personal use, or for investment or carrying on a business.

September 28, 2017. The Australian Securities and Investments Commission issued information sheet 225, explaining how ICOs would be regulated in the country under the Corporate Act 2001.[2] A separate guidance was published on ASIC’s MoneySmart website to inform investors about the risks of investing in ICOs.[3] According to the information sheet, an ICO could be classified as either a management investment scheme, an offering of shares, an offering of derivatives, or an offering of services or products, each is regulated under different provisions and may subject the issuer to different registration, licensing, disclosure or other requirements.

October 18, 2017. The Australian Parliament approved the bill to amend A New Tax System Act of 1999 and associated Regulations, which effectively put an end to the double taxation situation on digital currency.[4] The previous legislation, which was issued on December 17, 2014, required that the Australian to pay taxes for purchase of digital currency as well as use of digital currency to purchase goods and services subject to Good and Service Tax.[5] The amendment, nevertheless, provided that digital currency will be treated as fiat money for GST purposes from July 1, 2017.

December 7, 2017. The Australian Parliament passed the bill to amend Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 to bring digital currency exchange providers into the scope of regulation.[6] Among other rules, the law as amended requires digital currency exchanges in Australia or run by Australia person to register on the Digital Currency Exchange Register maintained by AUSTRAC; adopt and maintain an Anti-Money Laundering/Counter-Terrorism Financing program to identify, reduce, and manage money laundering and terrorism-financing risks; identify and verify their customers’ identities; monitor and report large or suspicious transactions to the Australian Transaction Reports and Analysis Centre (AUSTRAC); and keep certain records of transactions, customer identity and the financing program for seven years. The amendments and the associated new rule has come into effect on April 1, 2018, following assent by the Governor-General.

April 3, 2018. New regulations aimed at regulating cryptocurrency service providers are implemented by AUSTRAC, which requires that digital currency exchanges to comply with the updated AML/CTF requirement.[7] Per the announcement, cryptocurrency exchanges will have a grace period of six months, during which the AUSTRAC can only take enforcement action if the companies fail to take “reasonable steps” to comply, but registration must be completed before May 14, 2018.

New Zealand [8]

July 15. 2016. New Zealand’s Financial Markets Authority noted it has received complaints from New Zealand-based clients of IGOT, an Australia-based bitcoin exchange, about IGOT’s failure to repay clients in accordance with their instructions.[9] The failure was allegedly caused by a Denial-of-Service attack, which crashed the server of the platform.[10] The FMA explained that IGOT is not registered or required to be registered to provide financial services in New Zealand.

November 22, 2017. A report was issued by the Reserve Bank of New Zealand, with the aim to enhance public understanding of cryptocurrency and the underlying technology.[11] The report highlighted some of the economic, financial and legal risks associated with the use and investment of cryptocurrencies, and discussed the transformative and disruptive implications of these technologies for users, financial systems, and the regulatory regime.

October 25, 2017. The FMD published a new guidance on ICOs and cryptocurrency services on its website alongside online resources for investors.[12] The regulator noted that depending on the specific characteristics and economic substance of an ICO, the token or coin offered may fall under the definition of financial product, which subject it to the regulation of Financial Markets Conduct Act 2013. With respect to business that offers cryptocurrency services, such as wallets, exchanges or brokers, the FMA also set forth the legal obligations: (1) Must be a member of a dispute resolution plan; (2) Must be on the Financial Services Providers Register; (3) Must comply with fair dealing provisions in the Financial Markets Conduct Act.

April 3, 2018. The Inland Revenue made a clarification on its website that virtual currencies should be treated as property for tax purposes.[13] It means that the proceeds people get from buying or selling cryptocurrency are taxable under New Zealand law.

 

End Notes

[1] https://www.lavan.com.au/advice/
banking_finance/virtual_currencies_ato_guidelines_for_bitcoin
[2] http://asic.gov.au/
regulatory-resources/digital-transformation/initial-coin-offerings/
[3] https://www.moneysmart.gov.au/
investing/investment-warnings/initial-coin-offerings-icos
[4] http://parlinfo.aph.gov.au/parlInfo/
download/legislation/bills/r5972_first-reps/
toc_pdf/17200b01.pdf
[5] The Australian Taxation Office issued the public ruling GSTR 2014/3 in December 2014, advising that digital currencies such as Bitcoin shall not be treated as money for GST purposes
[6] http://parlinfo.aph.gov.au/parlInfo/
download/legislation/bills/r5952_aspassed/toc_pdf/
17177b01.pdf
[7] http://www.austrac.gov.au/news/
digital-currency-exchange-providers-register-online-austrac
[8] It was alleged that the Reserve Bank of New Zealand had once posted on its website that “Non-banks do not need our approval for schemes that involve the storage and/or transfer of value (such as ‘bitcoin’) – so long as they do not involve the issuance of physical circulating currency (notes and coins)”. Malone, J. A. (2014). Bitcoin and Other Virtual Currencies for the 21st Century. Lulu Press, Inc. Nevertheless, the page could not be found right now.
[9] https://fma.govt.nz/news-and-resources/
warnings-and-alerts/businesses-to-be-wary-of/
[10] https://www.ccn.com/new-zealand-
authority-posts-warning-about-bitcoin-exchange-igot/
[11] https://www.rbnz.govt.nz/-/media/ReserveBank/
Files/Publications/Analytical%20notes/2017/an2017-07.pdf
[12] https://fma.govt.nz/news-and-resources/
media-releases/fma-commentary-on-icos-and-cryptocurrencies/
[13] http://www.ird.govt.nz/campaigns/
2018/cryptocurrency-tax.html

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