The new rules for digital exchanges, ICOs and crypto: ASIC, AUSTRAC and the ATO


In a packed out information session this week held at the Perth Town Hall, ASIC, AUSTRAC and ATO laid down the law on ICOs and crypto…

The Perth Fintech meetup shifted to the larger venue of Perth Town Hall to hold a community information session on Wednesday night, outlining the implications of new national legislation (3rd April 2018) as regards Initial Coin Offerings (ICOs), cryptocurrencies and digital currency exchanges (DCEs).

Anti Money-Laundering & Counter-Terrorism Financing

AUSTRAC is Australia’s financial intelligence agency and anti-money laundering and counter-terrorism financing (AML/CTF) regulator.

The new AML/CTF laws cover for the first time regulation of service providers of cryptocurrencies, including bitcoin, ethereum and all the rest.

AUSTRAC regulate all digital exchanges, share information with partner agencies that may point to crimes or potential crimes.

“You have to register with AUSTRAC if you provide a designated service, such as an exchange of fiat money for cryptocurreny or the entity issuing digital currency,” Kirsty Baldassar, Regional Intelligence Manager, AUSTRAC told the gathering.

“All such businesses must register with AUSTRAC; even if providing such services before 3rd April. Failing to do so can be taken to be criminal activity. You have 6 weeks to do so. And be fully compliant under the Act by 4th October 2018 (6 months after April 3rd).”

About a hundred DCEs are already registered, and to know more, you are urged to visit the relevant pages of the AUSTRAC website.

Corporate Law

Australian Securities and Investments Commission (ASIC) is the independent Australian government body that acts as Australia’s corporate regulator. Representatives also addressed the event.

“ASIC is committed to ensuring these new technologies flourish in a protected environment for consumers and all; we are focussing enforcement over misleading and deceptive conduct,” said Natalie Dorr, Regional Commissioner WA, ASIC.

“If you are selling something, you have obligations not to mislead or deceive, through your marketing and sales messages.”

Although this is an ‘exciting area’, ASIC will be looking out for scammers in order to protect the public.

“With innovation comes risk, ” said Rhonda Loo, Senior Specialist, Market Infrastructure, ASIC.

“There’s a level of opportunism, as it can be seen as a relatively easy way to raise money. This will attract scammers, and this will lead to lower confidence.

“Australian laws will apply even for overseas ICOs if you are selling to Australian residents. Seek proper advice, and ASIC guidance, if you are looking at an ICO.”

The relevant fact sheet is ‘Info Sheet 225’, which be viewed on the ASIC website.

“Look at the Info Sheet and engage with us,” urged Johnathan Hatch, Senior Adviser, Innovation Hub, ASIC.

“Consider your obligations, consider your business model, and allow us to advise you. What is the nature of the crypto currency, how do the money flows work, and what info should you provide to consumers? ASIC can identify issues in this regard.

We are dealing with real people’s money, so basic consumer protections are in place.”

Tax Implications

When it came to tax, there were a couple of presentations on how a cryptocurrecny is dealt with – is it money, or is it an asset (property)?

In most cases it is treated as an asset, and so capital gains tax (CGT) would apply.

“As regards income tax, it depends whether you are transacting cryptocurrencies as ‘normal business’ or not, ” said Laurren Pamenter, Senior Technical Adviser, Tax Counsel Network, ATO.

If it’s the latter, CGT applies (as it is for a share sale). Exchanging one crypto for another is also a CGT event, it would appear.

If you buy crypto for ‘personal use or enjoyment’ and make purchases for personal use, then it might not be CGT. CGT would not be applicable up to $10k. If you are speculating in its value, buying and selling cryptos for their own sake, then it will be CGT eligible.

Whatever you are doing, the ATO urges you to keep complete and full records.

As for GST, this is a case where a cryptocurrency is treated ‘as money’, in order to prevent a possible double tax event. The relevant law was adjusted in July 2017.

“Normal tax rules apply,” said How Wood, “So I encourage anyone thinking of providing an ICO to talk to the ATO early on.

“The way you structure your business, whether your staff are employees or contractors and the size of the ICO will determine its tax implications, as will other matters.”

This page (QC 42159) on the ATO website is the relevant one to pore over.

Do your own research

In the brave new world of ICOs, DCEs and crypto, it is clear that you enter a world where you have to be very careful on what you do, or are planning to do – be it buying or selling a crypto, issuing one, engaging in an ICO or setting up a digital exchange.

The ASIC, ATO and AUSTRAC’s message is clear: do your research and engage with them early to ensure you do not fall fowl of your legal responsibilities.


Disclaimer: The above is some edited notes from the session, and should not be taken as legal or financial advice. Please do your own research, seek independent advice and make contact with ASIC, ATO and AUSTRAC on any or all of these matters.