In its latest submission to the ongoing Australian Senate inquiry, the Australian Securities and Investment Commission (ASIC) came into a final decision that bitcoin and similar other cryptocurrencies are not financial products.

ASIC, which maintains Australian organisations, financial markets and services, and finance sector professionals have made a conclusion that digital currencies themselves are not within the current legal definition of financial products.

This means that a person basically does not require an Australian market license to operate a digital currency trading platform, or an Australian financial services license sot that one will be able to trade in digital currency.

ASIC made mentioned that in its submission that contracts for the sale and purchase of digital currencies are normally settled immediately and as a result are not likely to be derivatives or financial products.

Moreover, it has determined that some facilities were able to develop the convenient use of digital currencies to make payment which are regulated by the commission.

Treating digital currencies in the same manner as with national currencies might not end up with a substantial change to how digital currencies are regulated under the Corporations Act. However, it also said that treating bitcoin as a true currency might end up for some contracts for the purchase and sale of digital currencies to be classified as financial products if the contracts are not settled immediately despite such transactions are typically settled immediately.

If bitcoin and similar other cryptocurrencies are eventually traded as a real currency, this could result in exchange contracts being subject to consumer security protection obligations in the ASIC Act.

In August, the Australian Taxation Office (ATO) recently released its guidance on taxation treatment of bitcoin to be regarded as a barter transactions with similar taxation consequences, save the ones they are doing it for business purposes or for transactions that are worth more than $10,000 Australian dollars wherein it would be treated as a commodity or service which is applicable to the Goods and Services Tax (GST).

This treatment is likely to end up in bitcoin traders subject to GST both when the purchasing and selling the digital currency, a tax hit that some industry stakeholders have said will drive some firms operating in the digital currency space offshore.

Meanwhile, the Australian Attorney-General’s Department has announced that although it has not yet seen controvertible evidence of the widespread use of bitcoin for criminal or terrorist activities, regulators will still have to be careful on the development of the technology.

The apparent anonymity and security of digital currencies will be exploited and abused to facilitate the laundering of earnings of crime and the purchases of illicit services and goods. The department mentioned in its submission to the inquiry that there are substantial concerns regarding its potential use for terrorism which poses risks to Australia’s national security framework.
The department said that the digital currency might be easier to track than traditional currencies for the purposes of tracking by law enforcement purposes due to the digital currency’s blockchain technology.

Bitcoin provides users the capacity to transact under the concealed identity of their bitcoin address. However, all of their transactions are available for public viewing and hence for law enforcement inquiry.

When these transactions are examined and used to make a pattern of behaviour, experts in a simulated experiment were able to show the identities of approximately 40 % of bitcoin users. Furthermore, the Senate Economics Reference Committee is anticipated to release its report into the digital currencies inquiry by the first parliament sitting by March of next year.