Since its inception, one of the big drawcards of Bitcoin has been its theoretical ability to avoid regulation. Launched in 2009 — while the world was experiencing a financial crisis that had emerged from a blend of big bank greed and government ineptitude — Bitcoin seemed to be something of a magic bullet to the problems associated with more traditional currencies and government-backed finance.
Of course, this was all speculative territory — at the time, Bitcoin was an interesting tech curiosity, but not something that had proven itself in the marketplace. But that would change fairly quickly; once the first commercial transaction with Bitcoin took place in 2010, it immediately garnered attention outside of its original tech fandom.
Questions about the legality of Bitcoin began to emerge almost immediately. Getting consumers and retailers educated around a currency that didn’t “exist” in the traditional sense was an extensive process. Its much-touted anonymity also meant that it was viewed with suspicion by many, even as others embraced it — and its initial popularity on black markets like Silk Road didn’t assuage these concerns, either. “Is Bitcoin illegal?” was a question on many people’s lips at the time.
However, as Bitcoin grew in popularity — and more cryptocurrencies began to emerge and be seen as a viable mainstream investment — Bitcoin legal issues naturally began to be taken more seriously. While early enthusiasts were probably a bit over-enthusiastic in promoting it as the currency of the future, governments, banking institutions and private businesses all began to recognise the need for engaging with Bitcoin, whether or not they liked it.
So, is Bitcoin legal in Australia?
Legislation almost inevitably runs behind technology, and Bitcoin has been no exception. The first laws specifically making Bitcoin legal in Australia weren’t created until 2017 — 8 years after the technology launched — though people were undoubtedly buying Bitcoins anonymously in Australia in the years prior.
The current legislation is also primarily concerned with two key factors — taxation and the legality of what’s “purchased” with Bitcoins. Is Bitcoin legal? Yes. Is it a currency? Not really in Australia. It’s treated more akin to a stock or an asset. Accordingly, if you decide to sell your Bitcoins and make a profit, you may be required to pay Capital Gains Tax at the end of the next financial year. As might be expected, it’s also not legal to use it to trade for items that are already illegal — though this already applies to cash or other forms of barter transaction, anyway.
Bitcoin and government regulation
The question of “Should Bitcoin be regulated?” has been a thorny issue among the crypto community; some hardline purists posit that regulation is a betrayal of the core principles behind the original Bitcoin ethos. Others are more pragmatic, accepting it as a cost of doing business and building more mainstream acceptance, if not necessarily being enthused about the involvement of a central authority like the government.
But though it’s probably fair to say that Libertarian-minded voices tend to shout the loudest in the crypto community, there are definitely investors who would like to see more regulation. Investor protections need to be considered, as do the possibilities of hacks or theft. Is Bitcoin safe and legal? Yes, to a point — and there are many who would like to see that risk further reduced. Though there are undoubtedly criticisms to be levelled at government-backed currencies, having the backing of a bank or government does provide a certain amount of consumer protection — particularly when it comes to electronic transactions.
Speak to the Bitcoin experts at BTC Markets
Got questions about Bitcoin regulation in Australia? The team at BTC Markets is here to help. We regularly run features on the latest trends and developments with the cryptocurrency marketplace. We also have a great set of FAQs that can help assist with any questions you may have around the topic, such as trading or pricing.
We’re also your ideal point of contact if you’re interested in investing in Bitcoin. Here at BTC, we’re equipped to get you started on your crypto journey through investments in cryptocurrencies like Ethereum, Ripple and Litecoin. Whether you’re looking at it as a short-term investment or as part of a longer-term investment like staking or a self-managed super fund, BTC is here to help.
Get in touch with the team at BTC today to discover how you can create your own account. We’ll get you started on the path to investment.
Are Bitcoins illegal?
The short answer is no, not in Australia. Cryptocurrency regulations in Australia are relatively progressive and look likely to stay that way for the foreseeable future. However, just as with any other form of commerce, it’s not legal to use them to purchase items or substances that would otherwise be illegal anyway. So if you’ve been wondering, “Are Bitcoins legal?” now you know for sure.
Is cryptocurrency legal?
As with Bitcoin itself, different countries have taken a wide variety of responses to cryptocurrency in general. Although it’s legal in Australia, it’s unlikely that we will see a unified world position on cryptocurrency anytime soon. However, government attitudes are likely to shift over the coming years as cryptocurrency continues to expand its mainstream presence.
Are cryptocurrencies regulated?
It varies around the world. Tech usually runs at least a few years ahead of legislation, which means that while there are laws in many countries governing cryptocurrencies, there isn’t necessarily specific legislation for all of the varieties that currently exist. Combine this with the fact that some cryptocurrencies have been created as novelties rather than a tradeable commodity or outright flopped once they hit the marketplace, and it’s easy to see how some just fly beneath the radar. However, numerous governments have created laws around Bitcoin specifically, in no small part due to its prominence in the media.
Can the government make Bitcoin illegal?
Theoretically, yes. A number of governments around the world already have. However, it’s unlikely to become illegal in Australia. Since 2017, Bitcoin laws in Australia have been relatively lenient. They’re primarily concerned with issues around capital gains tax when they’re converted into cash or preventing Bitcoin from being used to purchase illegal materials.
What is Bitcoin’s legal status by country?
This is a complex question — made more so by the fact that the situation is constantly evolving. The only country currently accepting Bitcoin as legal tender at the time of writing is El Salvador. However, a number of countries have accepted its status as an asset rather than a full-blown currency in and of itself. The approach tends to be fairly laissez-faire. How that asset is utilised is largely up to the holder — if private companies and individuals wish to accept it as payment, that’s not really a problem, as it essentially acts as a form of barter. However, it can have capital gains tax implications when it’s converted to cash for profit — Australia is one country where this is the case.
Nonetheless, there are a number of countries where Bitcoin is illegal. China, Russia, Vietnam, Bolivia, Columbia and Ecuador have all taken varying stances against its use. The cases against it vary; in some cases, it can be seen as authoritarianism and government overreach. In other circumstances, it could be argued that it’s more to do with consumer protection. Russia, for example, does not regulate Bitcoin per se but its use for goods and services is banned.
China is the most interesting case from an investor’s perspective; though it’s a major hub for mining, cryptocurrency transactions are explicitly prohibited. There have also been numerous attempted crackdowns on the level of mining in the country, so it will be interesting to see how attitudes shift over the coming years.