Ideas about digital currencies, and attempts to create them, go as far back as the late 1990s – long before the introduction of Bitcoin in 2008. Bitcoin itself took years to break through, gaining global recognition and eventually reaching a value of around $20,000 per 1 BTC in 2017.
The value of the most popular cryptocurrency has plummeted since the Cryptocurrency Crash in 2018, which saw Bitcoin’s exchange rate fall to around $4,000. Yet the digital currency has bounced back in 2019, as new waves of investors have helped Bitcoin surpass the $8,000 mark. Though this rebound has fallen far short of reaching Bitcoin’s former heights, it is nevertheless a significant increase. Slowly but surely, although the hype has died down, cryptocurrency is regaining its value and popularity.
Unlike regular currencies, digital currencies are intangible and harder to trace. These unique characteristics of cryptocurrency have opened doors for a variety of shady practices.
With up to 7% of Australia’s population owning cryptocurrency, the Australian Taxation Office (ATO) has started to investigate suspicious behaviours in earnest, enforcing existing laws and issuing punishments where applicable.
Indeed, the Australian government anticipates receiving upwards of $3 billion in revenue from “fees and fines on cryptocurrency traders who do not report their capital gains”.
Government’s gamble
Yet these law enforcement efforts represent a significant upfront investment by the government. So far, the campaign to identify and prosecute tax evaders and other types of cryptocurrency criminals has cost the Australian government well over $1 billion, through its use of Data Matching processes. However, they are yet to generate the expected $3 billion in fines.
A recent report puts this investment in context, noting: “Cryptocurrency and blockchain technology is seen as an enabler of existing risks for the ATO. Cryptocurrency has been used to move funds within the black economy, hide money offshore, and is sometimes linked to risks with unexplained wealth and undeclared taxable capital gains.”
Despite lengthy prison sentences of up to five years depending on the severity of the crime, the Australian government offered to minimize or even fend off those punishments substantially so that offenders could stop and come clean before they are audited.
Setting the standards
As the Australian government enforces laws, issues warnings, collects fines and dishes out punishments to keep cryptocurrency traders in order, it is worth noting that other countries have also introduced similar efforts to ensure legal compliance.
The US Internal Revenue Service, for example, has already taken an aggressive approach by sending out warning letters to cryptocurrency investors in the country, in advance of heavier measures.
“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest, and penalties,” said IRS Commissioner Chuck Rettig.
Stay clean
The Australian government’s enforcement measures might lead to a decrease in cryptocurrency investors; however, as long as the possession of the virtual money is unaccompanied by tax evasion or other dubious behaviours, cryptocurrency owners can continue their practices without any legal worries.
In fact, businesses are beginning to encourage the use of cryptocurrency in transactions. Sydney startup Incent, a cryptocurrency provider, has partnered with United Petrol to offer 20% back on fuel payments for those paying with its own cryptocurrency. The other benefits of the technology remain the same as before, with the groundbreaking Blockchain technology keeping online transactions secure and easily managed.