In brief: Senate inquiry to scrutinise digital currencies

How currencies such as Bitcoin are taxed and regulated to be examined

Senator Sam Dastyari has won Senate support for an inquiry into the regulation and taxation of digital currencies such as Bitcoin.

The Labor senator today moved a motion for the upper house’s Economics References Committee to hold the inquiry.

The inquiry will examine:

(a) how to develop an effective regulatory system for digital currency that:
(i) ascertains the most appropriate definition of digital currencies under Australian tax law,
(ii) promotes competition and growth of the digital currency industry,
(iii) ensures ongoing stability in the financial services industry,
(iv) secures protection of consumers and businesses against illegal activity,
(v) incorporates digital currencies into Australia‘s national security framework, and
(vi) ensures the financial stability of the industry;

(b) the potential impact of digital currency technology on the Australian economy, including the:
(i) payments sector,
(ii) retail sector, and
(iii) banking sector;

(c) how Australia can take advantage of digital currency technology to how Australia can take advantage of digital currency technology to establish itself as a market leader in this field; and

(d) any other related matters.

The Australian Taxation Office in August set out its approach to Bitcoin and other crypto-currencies.

In the ATO's view, Bitcoin is "neither money nor a foreign currency".

"Transacting with bitcoins is akin to a barter arrangement, with similar tax consequences," the guidance states.

Bitcoins will be treated by the ATO as an asset for capital gains tax purposes.

Advocates of the currency criticised the ATO’s stance, saying that it could lead to businesses paying GST twice.

The digital currencies inquiry is due to report on the first sitting day in March 2015.

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