Published on the 22/03/2016 | Written by Newsdesk

Moves afoot to recognise Bitcoin as money…

Digital currency is growing in stature in Australia as the government has proposed an amendment in law to recognise Bitcoin as money. As part of that amendment, a ‘double taxation’ of Bitcoin transactions could fall away, making it cheaper and easier to transact using the digital currency.

The news emerges as part of a wide-ranging policy statement on FinTech titled ‘Government response to Australia’s FinTech priorities’.

At present, Bitcoin isn’t treated as a currency, but rather as a means of barter. In practice, that means selling digital currencies incurs GST and payments received in Bitcoin are taxable.

The policy statement said Government will seek to:

• Improve banking access for digital currency companies by incorporating digital currency into the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 (AML/CTF Act).
• Establish a roundtable comprised of the banks, regulators, government and industry to address the ongoing problem of the ‘de‑banking’ of digital currency businesses.

It further said: ‘We note that reports from the Senate Economics References Committee’s Inquiry into Digital Currency and the Productivity Commission’s Inquiry into Business Set Up, Transfer and Closure recommended that digital currency be treated as money for GST purposes to address the current ‘double taxation’ effect and that AML/CTF laws should apply to digital currencies.

‘The Government is committed to addressing the ‘double taxation’ of digital currencies and will work with the industry on legislative options to reform the law relating to GST as it is applied to digital currencies.’

Digital currency, of which the 2009-introduced Bitcoin is the most prominent, is a tricky beast to understand. At the crux of it is ‘blockchain’ technology, which is apparently a distributed ledger into which all transactions are written. There is a finite number of Bitcoins available, and ‘mining Bitcoin’ by processing the ‘blockchain’ with expensive computer hardware is a process by which anyone can earn Bitcoin.

If that sounds confusing (and we at iStart happily concede to be scratching our heads), just revisit your understanding of fiat money. It’s also far from simple, yet seems to have worked quite well ever since the Yuan Dynasty.