Compulsory ID Proof and Taxes to hit Australian Bitcoin Investors
In an escalation of the Australian Taxation Office (ATO)’s crusade against Bitcoin, it has been revealed that anti-money laundering legislation is due to arrive next month as a start to the long-anticipated regulatory crackdown on cryptocurrencies, as reported by The Australian. In an effort to pin down the identities of Bitcoin holders, tax-dodging Bitcoin investors will be pursued for their tax liabilities.
100-point ID verification required for Aussie bitcoin investors
Under the new legislation, a compulsory 100-point identification system (where ID documents are assigned points according to importance, and must total 100 to pass) will be used by the ATO as a check against Bitcoin investors. This enables the ATO to leverage its data-matching techniques to trace Bitcoin transactions to investors, eliminating anonymity and tackling the previously opaque world of cryptocurrencies.
De-anonymizing cryptocurrencies
The ATO’s move against cryptocurrencies follows a growing international movement in recent months to regulate the crypto world, tackling money-laundering, terrorism financing and tax avoidance. Five days earlier, a massive ‘summons' from the U.S. Internal Revenue Service was received by Coinbase, forcing the company to disclose requested ID details of 13,000 users including ‘taxpayer ID’ numbers, name, birthdate, address and historical transaction records for users that have seen over $20,000 trading volume from 2013 to 2015.
It is anticipated that the ATO would be planning a similar crackdown, as it battles perceptions that Bitcoin and other cryptocurrencies have emerged as undetected tax-evasion loopholes, not to mention their use in organized crime and black markets to preserve anonymity. Ever since peaking at US$20,000 in mid-December, the price of Bitcoin has settled to around US$10,500 as Asia, U.S., Russia and now the Australian government are closing the regulatory clamp.
Paul Drum, a member of the National Tax Liaison Group, remarks that it was a ‘watershed moment for the ATO, enabling them to access and thoroughly review cryptocurrency exchange account data for the first time’.
’The effectiveness of the anonymity of Bitcoin and other cryptocurrencies is starting to fade. These coming changes mean that people shouldn’t assume they can hide forever behind blockchain technology, nor should they assume there are no tax consequences,”
Drum asserts.
The ATO currently does not treat Bitcoin as a currency, but rather an asset. Although it is unclear whether the same ID requirements will be imposed on other cryptocurrencies, regulatory risk remains a question mark for cryptocurrency investors in Australia and globally in 2018 as more capital flows into the market.
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