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qxp 11/19/20 1:47 PM Page 44

J U L I E CA S S I DY , M A N H U N G A LV I N C H E N G A N D TOA N L E
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Cryptocurrencies are quite alien to existing legal concepts

and this makes it difficult for regulators to determine which
aspects (if any) require regulation and, if so, how to control
and monitor these activities.

It’s a Bird! It’s a Plane! No, It’s a

Cryptocurrency!

For the reasons outlined in this article, China has prohibited the issuing of
initial coin offerings (ICOs), prohibited financial institutions engaging in trans-
actions involving cryptocurrencies and effectively banned trading in cryptocur-
rencies. In addition to China, which provides the “testing” standard, three
nations have been selected for analysis in this article, namely, New Zealand,
Australia and South Africa. All have to date chosen not to ban ICOs, trading
or payment transfers in cryptocurrencies. New Zealand has maintained that
it will apply its existing regulatory frameworks. Australia and South Africa
have waivered and South Africa looks like it is in the process of introducing a
specialist regulatory framework. Ultimately, it will be contended that South
Africa has taken an appropriately cautionary approach, asserting that its initial
policy position is based on the “existing landscape and current [low] levels of
adoption, acceptance and use”, reserving the right to amend its policy stance
if the use of cryptocurrencies for money laundering and/or illegal activities
proves to be too risky.

CRYPTOCURRENCY l DECEMBER 2020 l JOURNAL OF INTERNATIONAL TAXATION 45

JOIT-20-12-07-Cassidy.qxp 11/19/20 1:47 PM Page 46
Designing an appropriate regulatory
framework for cryptocurrencies is a dif-
ficult task for government agencies. The
heart of the problem lies in trying to un-
derstand what cryptocurrencies actually
entail. To date, there is no clear and au-
thoritative definition of a cryptocurrency.
While, as discussed below, countries such
as Australia have attempted to define cryp-
tocurrencies in terms of a form of “digital
currency”,1 they did so purely for the pur-
poses of applying the A New Tax System
(Goods and Services Tax) Act 1999 (Cth,
GST Act 1999). Thus, even in this juris-
diction there is no comprehensive defi-
nition of cryptocurrencies for all legal
purposes.
Part of the difficulty in encapsulating
the nature of cryptocurrencies is their in-
tangible nature. Cryptocurrencies have
no physical form. They are entirely digital.
Using blockchain technology, each new
transaction involves adding a new link to
the chain, the final coin being this “chain”
of data strings. 2 Most importantly, this
unique digital chain that underpins a cryp-
tocurrency has in itself no value.3 The me-
chanics of such transactions is expanded
upon below, but it highlights why cryp-
tocurrencies are quite alien to existing
legal concepts, thus making it difficult for
regulators to determine which aspects (if
any) require regulation and, if so, how to
control and monitor activities. This dif-
ficulty exists at three levels: (i) ICOs, which
bring the cryptocurrency into existence;
(ii) trading in cryptocurrencies; and (iii)
the use of cryptocurrencies as a method
of payment.
This article begins by exploring com-
mon features of cryptocurrencies as a
means towards designing a regulatory
framework that accommodates the unique
nature of cryptocurrencies and the un-
derlying risks and concerns that this en-
tails. This regulatory discussion should
be seen at two levels. First, the macro level.
Should cryptocurrencies simply be banned
given the underlying consumer risks and
JULIE CASSIDY is a Professor at the Commercial
Law Department, University of Auckland. MAN
HUNG ALVIN CHENG is a Lecturer at the Depart-
ment of Finance and Accounting, University of Not-
tingham. TOAN LE is a Lecturer at the Department
of Business Law and Taxation, Monash Business
School, Monash University.
46 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020
concerns stemming from their use for il-
legal purposes? For the reasons outlined
below, China has prohibited the issuing
of ICOs, prohibited financial institutions
from engaging in transactions involving
cryptocurrencies and effectively banned
trading in cryptocurrencies.4 Alternatively,
as in Japan, a nation may not only allow,
but support and foster, trading in cryp-
tocurrencies and arguably5 recognise such
as a form of legal tender.6 However, there
may be limits even in jurisdictions such
as Japan, which is one of the jurisdictions
that is most friendly towards cryptocur-
rencies. Japan has not only provided clear
guidance on the accepted functions of
cryptocurrencies and the activities the ju-
risdiction accepts (i.e., a payment method
and a trade commodity) but also devel-
oped a regulatory framework.7
In addition to China, which provides
the “testing” standard, three nations have
been selected for this analysis, namely,
New Zealand, Australia and South Africa.
The three jurisdictions have some broad
similarities in their taxation systems and,
most importantly, have had relatively lim-
ited exposure to cryptocurrencies. As dis-
cussed below, all have, to date, chosen not
to ban ICOs, trading or payment transfers
in cryptocurrencies. However, it will be
contended that South Africa has taken an
appropriately cautionary approach, as-
serting that this initial policy position is
based on the “existing landscape and cur-
rent [low] levels of adoption, acceptance
and use”.8 As discussed below, the South
African Government has reserved the
l CRYPTOCURRENCY
right to amend its policy stance if the use
of cryptocurrencies for money laundering
and/or illegal activities9 proves to be too
risky.10 An additional factor raised by reg-
ulatory authorities is concern for the pos-
sibility that the market capitalisation of
cryptocurrencies will increase in South
Africa, or even worldwide, to the extent
that it destabilises the monetary system.11
These factors may trigger a reversal in
policy. Ultimately, however, these impor-
tant foundational questions as to the le-
gitimacy of cryptocurrencies will be
determined by the government of the rel-
evant jurisdiction. There is no right or
wrong answer, but a cautionary approach
is recommended.
If a government allows such activities,
the next macro question is: will it intro-
duce a specialist regulatory framework or
seek to apply existing regulatory frame-
works? It will be seen that New Zealand
has applied its existing legal frameworks
to cryptocurrencies. Australia has sought
to applying existing legal frameworks to
cryptocurrencies, but as discussed below,
has legislated to specifically exempt certain
supplies of cryptocurrencies from goods
and services tax (GST). South Africa has
made strong statements that existing laws
will apply to cryptocurrencies;12 however,
it has recently legislated to exempt cryp-
tocurrencies from the value-added tax
(VAT) by adding same to the definition
of “financial services”. 13 As discussed
below, the Intergovernmental FinTech
Working Group (IFWG) Crypto Assets
Regulatory Working Group has signaled
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:47 PM Page 47
that South Africa will effect a “limited reg-
ulatory” framework for cryptocurrencies,
particularly aimed at regulating “virtual
assets” for consumer protection, terrorist
financing and anti-money laundering
purposes.14 So, it may be expected that a
specific regulatory framework for the li-
censing of cryptocurrency exchanges will
emerge sooner rather than later.
At the micro level, if these activities are
allowed, how will they be regulated under
taxation law, securities law, money laun-
dering law and consumer protection laws?
These matters are explored further in the
context of each jurisdiction, the primary
focus being taxation law. It will be seen
1
See the relatively new definition of “digital currency”
in s 195-1 of the A New Tax System (Goods and Serv-
ices Tax) Act 1999 (Cth), introduced by the Treasury
Laws Amendment (2017 Measures No 6) Act 2017
(Cth).
2 6
Thomas Slattery, “Taking a Bit out of Crime: Bitcoin
and Cross-Border Tax Evasion” (2014) 39 Brook J Intl
L 829 at 836.
3
Ghassan Karame, Elli Androulaki and Srdjan Capkun,
“Two Bitcoins at the Price of One? Double-Spending
Attacks on Fast Payments in Bitcoin” (2012) IACR
Cryptol ePrint Arch 248; IFWG Crypto Assets Regu-
latory Working Group Consultation Paper on Policy
Papers for Crypto Assets (2019) at [4.1.1].
4 IFWG Crypto Assets Regulatory Working Group, above
In September 2017, a joint statement was issued ban-
ning any ICO in China. It further reinforces that no
organisation is allowed to engage in the exchange of
virtual currency as legal tender: See Announcement
of the People’s Bank of China, the Office of the Central
Leading Group for Cyberspace Affairs, the Ministry of
Industry and Information Technology and Other Depart-
ments on Preventing the Financing Risks of Initial Coin
Offerings (April 2017).
5 11
It has been suggested that recent amendments to the
Act on Settlement of Funds (Japan) and the Financial
Instruments and Exchange Act (Japan) prepared by
the Japanese Financial Services Agency (FSC) that
change the terminology from “cryptocurrencies” to
that the answer largely lies in the charac-
terisation accorded to cryptocurrencies.
Once the government has determined if
the issuing of ICOs, trading in cryptocur-
rencies or vendor/purchaser transactions
are allowed, it will then need to determine
the legal character of the cryptocurrency.
The notion that cryptocurrencies are a
“currency” is a misnomer. As stated above,
whether it is to obtain the status of a “cur-
rency” or a form of legal tender will be de-
termined by the government of the relevant
jurisdiction. At one end of the spectrum,
ICOs and trading may not only be legal
but be facilitated by government conces-
sions, such as recognising cryptocurrencies
“crypto assets” is designed to push back on the asser-
tion that it is a form of legal tender: see Marie Huillet
“Japan Officially Approves Bill to Amend National Leg-
islation Governing Crypto Regulation” Cointelegraph
(online ed, 31 May 2019).
The Payment Services Act 2009 (Japan) recognises
cryptocurrencies as a form of legal tender: see Garrett
Keirns “Japan’s Bitcoin Law Goes into Effect Tomor-
row” Coindesk (online ed, 31 March 2017) at 2.
7 the Value-Added Tax Act 1991 (South Africa).
Huillet, above n 5. See further ICOMain.io, “A Move
Towards a Mature 2019 Market: Japan’s Draft Regu-
latory Crypto Framework” (28 December 2018) Medi-
um <https://medium.com/icomainio/>.
8 15
n 3, at [5.3.4].
9
IFWG Crypto Assets Regulatory Working Group, above
n 3, at [4.1.2] and [5.3.4].
10
As discussed above, there is concern that the existence
of cryptocurrencies could create a parallel monetary
system that might compete with and thus threaten
the stability of the Rand: see IFWG Crypto Assets Reg-
ulatory Working Group, above n 3, at [4.1.1].
The South African Government agencies have
expressed strong concerns over this potential effect:
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [4.1.1]. There is concern that the exis-
tence of cryptocurrencies could create a parallel
CRYPTOCURRENCY
as legal tender as in Japan,15 or a form of
digital currency as in Australia for GST
purposes. South Africa has strongly as-
serted that cryptocurrencies are not a cur-
rency and have no legal tender status. 16
Thus, while it has exempted cryptocur-
rency transactions from VAT, it has done
so on the basis that the transactions (as
opposed to the asset itself) are a financial
service, not currency. 17 Equally, New
Zealand has maintained a strong stance
that cryptocurrencies are not currency,18
neither local nor foreign currency,19 and
are not legal tender.20
If the government decides it is not “cur-
rency”, how will it be characterised? The
monetary system that might threaten the stability
of the Rand.
12
South African Revenue Service “SARS’s Stance on the
Tax Treatment of Cryptocurrencies” (media release, 6
April 2018). See further the discussion of this issue in
IFWG Crypto Assets Regulatory Working Group, above
n 3, at [5.2], also addressed below.
13
Taxation Laws Amendment Act 2019 (South Africa)
amended the definition of “financial services” in s 2 of
14
See further the discussion of this issue in IFWG Crypto
Assets Regulatory Working Group, above n 3, at [4.1.2]
and [5.2].
Keirns, above n 6.
16
South African Revenue Service, above n 12; and IFWG
Crypto Assets Regulatory Working Group, above n 3,
at [2.1.2] and [4.2.1.3].
17
Taxation Laws Amendment Act 2019 (South Africa)
amended the definition of “financial services” in s 2 of
the Value-Added Tax Act 1991 (South Africa).
18
See Inland Revenue “Taxing cryptocurrency”
<https://ird.govt.nz/>.
19
See Inland Revenue, above n 18; and Inland Revenue
“Public Ruling BR Pub 19/01: Income tax – salary and
wages paid in crypto-assets” (27 June 2019)
<https://taxtechnical.ird.govt.nz/>.
20
Inland Revenue, above n 18.
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government may, as in the case of New
Zealand, determine that cryptocurrencies
are property, a commodity. 21 This ap-
proach has also been adopted in the Aus-
tralian and South African income taxation
contexts where profits from cryptocur-
rencies are taxed as business income or
capital gains from the sale of an intangible
asset.22 A further related issue is whether
that characterisation will be embraced for
all purposes, such as in New Zealand, or
whether a government will be “schizo-
phrenic”, as in Australia, and pick and
choose which characterisation it will utilise
for different purposes.
What of the tax ramifications, which
are the focus of this article? As intangible
property, a commodity, not only will
transactions made in the course of busi-
ness be subject to tax as ordinary/business
income, but non-business trading may
also be subject to income/capital gains
tax. On the other side of the coin (sorry
for the pun!), what if employees are paid
in Bitcoin? Will the payment be taxed as
salary and/or bonuses or as personal prop-
erty/capital gains? These issues are ex-
plored in detail in the context of China,
Australia, New Zealand and South Africa.
Given the unique nature of cryptocur-
rencies, there can be no definitive answer
to any of these questions, whether they be
at the macro or micro levels. Ultimately, it
will be determined by the government of
the relevant jurisdiction. As to which way
a government might turn is anyone’s guess,
a “toss of a (bit) coin” (sorry, another pun!).
Understanding So, what makes cryptocurrencies so
Cryptocurrencies different from other intangible assets,
such as shares? The value of shares lies in
Why are these foundational questions so part with the valuable membership rights
difficult? At the heart of the issue is an that ordinarily attach to shares, such as
understanding of the nature of cryptocur- the right to vote, the right to declared div-
rencies. The authors have elsewhere pro- idends and the right to return of capital.31
vided an analysis of some of the key Cryptocurrencies do not normally32 confer
technical features of cryptocurrencies,23 membership rights,33 much less an income
but for the purposes of this article it is stream akin to dividends, nor returns of
important to the discussion below to step capital. More importantly, and arguably
back and explore why cryptocurrencies most intriguing, as stated above, the
are so alien to our existing legal frame-
work.
Part of the difficulty in encapsulating
the nature of cryptocurrencies is their in-
tangible nature. As stated above, cryp-
tocurrencies have no physical form. They
are entirely digital. Their very existence
lies in the data strings that represent each
“coin”.24 More specifically, a 64-charac-
ter-long identifier represents each initial
coin,25 which is then added to each time
there is a transaction.26 Using blockchain
technology, each new transaction involves
adding a new link to the chain, the final
coin being this “chain” of data strings.27
Yet, most jurisdictions, including those
focused on in this article,28 are quite con-
versant with the notion of intangible prop-
erty. They have legal systems in place to
deal with intangible property, whether
that be common law principles of property
law as in Australia and New Zealand, the
law of cession in South Africa,29 or statu-
tory regimes regulating the transfer and
registration of intangible property.30

21
Inland Revenue, above n 19.
22
In the South African context, see South African Rev-
enue Service, above n 12. In the Australian context,
see Australian Taxation Office “Tax treatment of cryp-
tocurrencies” (30 March 2020) <https://ato.gov.au>.
23
This section has been adapted from Julie Cassidy and
others “A toss of a (bit)coin: the uncertain nature of the
legal status of cryptocurrencies” (2020) 17(2) eJournal
of Tax Research 168.This section has been adapted
from Julie Cassidy and others “A toss of a (bit)coin: the
uncertain nature of the legal status of cryptocurrencies”
(2020) 17(2) eJournal of Tax Research 168.
24
Corin Faife “Bitcoin Hash Functions Explained” Coin-
desk (online ed, 19 February 2017).
25
Andreas Antonopoulos Mastering Bitcoin: Program-
ming the Open Blockchain (O’Reilly Media Inc, Califor-
nia, 2017) at 202.
26
Slattery, above n 2, at 836.
27
Id.
28
Namely, China, New Zealand, Australia and South Africa.
29
As incorporeal property cannot be physically trans-
ferred, the law of “cession” was developed in South
Africa to facilitate the quasi-delivery of incorporeal
property. See further Susan Scott, Cession for Students
(Juta, 1997) at [2.1]; and Julie Cassidy, “Capital Gains
Tax in South Africa: Lessons from Australia?” (2004)
16 SA Mercantile Law Journal 164 at 180–181.
30
For example, the Personal Property Securities Act
1999, the Personal Property Securities Act 2009 (Cth),
and the Securities Services Act 2012 (South Africa).
31
Classes of shares may enjoy different rights. Employee
shares typically have no voting rights attached to them
and preference shareholders are often limited to voting
on major decisions such as selling the business under-
taking/goodwill.
32
Research has investigated how decentralised
autonomous organisations (DAOs) or decentralised
autonomous corporations might be used in the context
of cryptocurrencies to give DOA token holders deci-
sion-making powers within their organisations, which
are ordinarily held by directors or shareholders. The
legal status of this type of business organisation is
unclear: Nathaniel Popper, “A Venture Fund With
Plenty of Virtual Capital, but No Capitalist,” New York
Times (online ed, New York, 21 May 2016). Larimer first
proposed the concept of a decentralised organised
company in an article in 2013: see Daniel Larimer,
“Overpaying for Security” (7 September 2013), Let’s
Talk Bitcoin <https://letstalkbitcoin.com/>. For a
recent discussion of the issue in the New Zealand con-
text, see Alex Sims, “Decentralised Autonomous
Organisations (DAOs) as an emergent institution”
(presented at The University of Auckland Business
School, 16 April 2019).
33
There may be limited rights to vote on dramatic
changes such as changing code.
34
Karame, Androulaki and Capkun, above n 3; and IFWG
Crypto Assets Regulatory Working Group, above n 3,
at [4.1.1].
35
As is noted below, on Tuesday 18 June 2019, when
Facebook announced the launch of its proposed libra
cryptocurrency, it was to function as a “stablecoin”
pegged against and backed by existing assets such
as the United States dollar, Euro, Japanese Yen, British
pound and Singapore dollar provided by a minimum
$10m contribution from members of the Libra Asso-
ciation Founding Members: see Kari Paul, “What is
Libra? All you need to know about Facebook’s cryp-

48 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020 l CRYPTOCURRENCY
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:47 PM Page 49
unique digital chain that underpins a cryp-
tocurrency has in itself no value.34 Without
the willingness of arguably naïve investors
to trade in these cryptocurrencies, they
would have no value.
The norm35 with popular forms of cryp-
tocurrencies, such as Bitcoin, is that there
is no financial backing supporting their
value. While we may say that is true of most
state-issued currencies today (i.e., the value
of the dollar no longer being supported by
a pile of gold bullion), cryptocurrencies
tocurrency,” The Guardian (online ed, San Francisco,
18 June 2019). Within hours prominent politicians were
expressing concerns, given the history of the use of
cryptocurrencies for illegal purposes such as money
laundering, addressed below, drug dealing, terrorist
funding and other black market activities. For example,
Jerome Powell, Chair of the Federal Reserve testified
before Congress on 10 July 2019 that the United States
Federal Government had “serious concerns” as to how
Libra would deal with “money laundering, consumer
protection and financial stability”: see Nathaniel Pop-
per, Mike Isaac and Jeanna Smialek, “Fed Chair Raises
‘Serious Concerns’ About Facebook’s Cryptocurrency
Project,” The New York Times (online ed, New York, 10
July 2019). With the lack of regulatory authority
approval, financial backers have pulled out and the
proposal seems to be at an end.
36
DAOs, noted above, share the features of “normal”
cryptocurrencies insofar as their integrity lies in
blockchain technology and they are not governed by
a central government. However, their computer pro-
grams are more transparent than that which normally
underpins cryptocurrencies and control is held by its
are also distinct in that they are not issued
by a sovereign nation or its reserve bank.36
While, as discussed below, China proposed,
and is in the initial stages of testing, the is-
suing of its own digital currency which will
be government backed to the same extent
as the RMB,37 to date, ICOs that bring the
cryptocurrency into existence have no con-
nection to a government or state bank.38
Cryptocurrencies exist in a decentralised
system without an intermediary party,39
such as a bank.40 Instead, each cryptocur-
token holders. See Usman Chohan, “The Decentral-
ized Autonomous Organization and Governance
Issues” (2017), 19 Regulation of Financial Institutions
eJournal; and Paul Vigna and Michael J Casey, The
Age of Cryptocurrency: How Bitcoin and the Blockchain
Are Challenging the Global Economic Order (Penguin
Random House, Croydon, 2015).
37
As discussed below, the proposed digital
currency/electronic payment (DC/EP) system in China
would be part of the central bank’s supply. It is cur-
rently being tested in four cities. See Masha Borak,
“Using China’s digital currency could be just like using
Apple Pay,” Abacus (online ed, 29 April 2020).
38
Oliver Massmann, “Did the State Bank of Vietnam Just
turn its Back on the Future of Commerce?” (11 Decem-
ber 2017), Duane Morris Vietnam <https://
blogs.duanemorris.com/>.
39
However, if you do not have a digital wallet, you may
have an intermediary — a service provider — that
administers your account on your behalf. The inter-
mediary is more akin to an agent than a regulatory
authority, such as a bank.
40
Massmann, above n 38.
CRYPTOCURRENCY
rency is contained in its own network. Each
time a person interacts with a cryptocur-
rency, their computer joins that network
to record the transaction. Computers in
the network are constantly updating the
information and sealing off the recorded
parts of the digital ledger by encrypting
the record using a complex mathematical
algorithm discussed below.41
A further feature of cryptocurrencies
is the use of cryptography, hence the crypto
prefix. Cryptocurrencies are “an electronic
payment system based on cryptographic
proof instead of trust, allowing any two
willing parties to transact directly with
each other without the need for a trusted
third party”.42 As noted above, cryptocur-
rencies exist in a decentralised system
without an intermediary party, such as a
bank. Thus, there is no need for the holder
to disclose their identity to a bank or other
regulatory authority. Instead, each trans-
action is effectively the application of a
complex algorithm43 that is solved by the
application of a public key and the owner’s
private key. 44 While the private key is
needed as proof of ownership, ultimately
the system is based on cryptographic proof
alone and thus provides a system of, albeit
recorded, anonymity.
Why is the anonymity of cryptocur-
rency transactions a matter of concern?
A thread in the discussion below is gov-
ernmental concerns about the use of cryp-
tocurrencies, such as Bitcoin, in the hidden
economy.45 The Silk Road and the Dark
Web are well-known examples.46 Through
41
Id.
42
Satoshi Nakamoto Bitcoin: A Peer-to-Peer Electronic
Cash System (2008).
43
Faife, above n 24.
44
John McGinnis and Kyle Roche Bitcoin: Order Without
Law in the Digital Age (Northwestern Public Law
Research Paper No 17-06, March 2017) at 27.
45
See, for example, in the South African context:
South African Reserve Bank, National Payment Sys-
tem Department Position Paper on Virtual Currencies
(Position Paper number 02/2014, December 2012);
and IFWG Crypto Assets Regulatory Working Group,
above n 3, at [1.1.2].
46
There is a wealth of literature on the Silk Road and its
interrelationship with cryptocurrencies, in particular
Bitcoin. Selected references include Aaron Lindquist,
“Funny Money” (2015) 1 Regent Journal of Global Jus-
tice and Public Policy 79; and Carmine DiPero, “Deci-
phering Cryptocurrency: Shining a Light on the Deep
Dark Web” (2017) University of Illinois Law Review
1267.
l DECEMBER 2020 l JOURNAL OF INTERNATIONAL TAXATION 49
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:47 PM Page 50
these exchanges, cryptocurrencies are
used to finance drugs, slavery and terrorist
activities. Equally concerning is the use
of cryptocurrencies for money laundering,
addressed to some extent below. A policy
concern for governments is whether they
want to be seen as facilitating or even im-
plicitly endorsing such illegal activities.
These features of cryptocurrencies
make all the above decisions at both the
macro and micro levels difficult.
China
The regulation of Bitcoin in China has a
turbulent history. According to a 2019 in-
dustry report, China is the world’s leading
Bitcoin mining hub, accounting for 66 per
cent of the crypto network’s processing
power.47 For over a decade, however, the
popularity of Bitcoin appeared to trouble
the Chinese Government, who had sought
to regulate, then ban, financial and payment
institutions in China from holding or trad-
ing Bitcoin.48 However, the most recent
development is that the Government has
launched a blockchain-based service net-
work, the technology behind Bitcoin, and
has launched its own digital Yuan.49
The first occasion for the Chinese Gov-
ernment to examine how Bitcoin would
be categorised came after the State Ad-
ministration of Taxation (SAT) issued
Letter No 818 [2008] of the State Ad-
ministration of Taxation, responding
to a query submitted by the Beijing Mu-
nicipal Bureau of Local Taxation regarding
the collection of individual income tax
on digital currency. At that point in time,
50 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020
transactions involving Bitcoin were not
prohibited. Letter No 818 confirmed that
Bitcoin was deemed to be a commodity
in China and that any gain from the trans-
fer of the virtual currency should be sub-
ject to individual income tax.50 Given it
was deemed to be a commodity, the ex-
change between a legal and a digital cur-
rency for a consideration would also
constitute a VAT supply. The tax rate of
VAT would be 15 per cent.
Further clarification of the legal status
of Bitcoin was made in 2009 when the Peo-
ple’s Bank of China issued the Adminis-
trative Measures for Electronic Currency
Issuance and Clearing Measures: Expo-
sure Draft. 51 Article 3 of this exposure
draft (ED) stated that electronic currency
is prepaid value stored on electronic media
owned by customers using it as a payment
47
Tom Wilson, “China’s bitcoin miners scoop up greater
power-research,” Reuters (online ed, 12 December
2019).
48
SFOX, “A Timeline of Bitcoin in China,” SFOX (online
edition, 22 January 2020).
49
Mohammad Musharraf, “China Launches Blockchain-
Based Service Network for Global Commercial Use,”
Cointelegraph (online ed, 27 April 2020).
50
Under the Individual Income Tax Law of the People’s
Republic of China (2011 Amendment), art 2(9), any
capital gains on the exchange of capital assets are
recognised as “incomes generated from property
transfer” under the individual income tax and the tax
rate is 20 per cent. In the context of cryptocurrencies,
the cost of the virtual currencies includes the purchase
price and any taxes that the taxpayer initially paid.
The taxation authority will determine the cost when
the taxpayer cannot provide the evidence regarding
the cost of virtual currency being traded. At this point
in time, transactions involving Bitcoin were not pro-
hibited.
51
People’s Bank of China, Administrative Measures for
Electronic Currency Issuance and Clearing Measures:
Exposure Draft (August 2009).
l CRYPTOCURRENCY
method.52 Electronic money includes card-
based electronic money and network-based
electronic money. Card-based electronic
money is often stored in chip cards, which
include mainly various smart cards (or
debit cards) issued by financial institutions
and various types of stored-value cards is-
sued by non-financial institutions. There
are two types of network-based electronic
money: one is electronic money in third-
party payment platforms and the other is
electronic money issued by major network
service providers.53 This definition speaks
to China’s proposal to issue its own digital
currency (discussed more fully below), that
it will act as a digital representation of the
RMB, and serve the payment functions of
the RMB in a digital environment. As will
be apparent, this notion of digital currency
is different from the functions of cryp-
52
People’s Bank of China, above n 52, at Ch 1, art 3.
53
People’s Bank of China, above n 52, at Ch 1, art 3. See
also China Union Pay Merchant Services Co The impact
of electronic money on commercial banks should not
be underestimated (January 2013).
54
See Zhang Yuchen and He Dan, “Jet Li’s One Foun-
dation goes public,” China Daily (online ed, 12 January
2011).
55
Sayuri Umeda “Japan” in The Law Library of Congress
(ed) Regulation of Cryptocurrency in Selected Jurisdic-
tions (The Law Library of Congress, Global Research
56
Centre, 2018) 53.
See Andy Greenberg, “End of the Silk Road: FBI Says
It’s Busted the Web’s Biggest Anonymous Drug Black
Market,” Forbes (online ed, 2 October 2013).
57
People’s Bank of China, Ministry of Industry and Infor-
mation Technology, China Banking Regulatory Com-
mission, China Securities Regulatory Commission and
China Insurance Regulatory Commission, Notice on
Prevention of Bitcoin Risks (December 2013).
58
People’s Bank of China, Ministry of Industry and Infor-
mation Technology, China Banking Regulatory Com-
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:47 PM Page 51
tocurrencies, as outlined in the introduc-
tion. Accordingly, China does not recognise
Bitcoin and other cryptocurrencies as a
digital currency within this definition.
The Government’s prohibition of Bit-
coin occurred in 2013. The year 2013 was
significant for the Bitcoin community for
several reasons. The use of Bitcoin had
gained nation-wide popularity after the
One Foundation, a Chinese charity
founded by the movie star Jet Li, an-
nounced that it was accepting Bitcoin for
donations to an earthquake appeal.54 More
importantly, this year saw the world’s
leading Bitcoin exchange at the time, Mt
Gox, on the brink of going into liquidation
following mismanagement of Bitcoin wal-
let accounts.55 More notoriety arose when
the FBI arrested a man who operated a
Silk Road website that used cryptocur-
mission, China Securities Regulatory Commission and
59
China Insurance Regulatory Commission, above n 58.
See The Law Library of Congress, Regulation of Cryp-
tocurrency in Selected Jurisdictions (The Law Library of
Congress, Global Legal Research Center, June 2018).
60
See Announcement of the People’s Bank of China, the
Office of the Central Leading Group for Cyberspace
Affairs, the Ministry of Industry and Information Tech-
nology and Other Departments on Preventing the
Financing Risks of Initial Coin Offerings (April 2017).
61
Xie Yu, “China orders banks to stop financing cryp-
tocurrencies as noose tightens around disrupter,”
South China Morning Post (online ed, 19 January 2018).
62
Tim Morrison, “The Greenback Needs a Digital
Makeover,” Foreign Policy (online ed, 24 January 2020).
63
As discussed below, the proposed digital currency
/electronic payment (DC/EP) system in China would
be part of the central bank’s supply. It is currently
being tested in four cities: see Borak, above n 37. See
also Mohammad Musharraf, “China to Test Digital
Yuan on Food Delivery Platform With 435 Million
Users,” Cointelegraph (online ed, 15 July 2020).
rencies to buy drugs and engage in money
laundering and narcotics trafficking.56
Against this backdrop, the Chinese
Government on 5 December 2013 issued
the Circular of the People’s Bank of
China, Ministry of Industry and Infor-
mation Technology, China Banking
Regulatory Commission, China Secu-
rities Regulatory Commission, and
China Insurance Regulatory Commis-
sion on the Prevention of Risks from
Bitcoin (2013 Circular).57 In the 2013 Cir-
cular, Bitcoin is referred to as a specific
“virtual commodity”.58 It states that Bit-
coin cannot be used as legal tender in
China, specifically prohibiting the use of
Bitcoin as currency. The 2013 Circular
prohibits any financial institution and
payment institution from conducting any
Bitcoin-related businesses. The 2013 Cir-
cular states that in accordance with the
Telecommunications Regulations of the
People’s Republic of China and Admin-
istrative Measures for Internet Infor-
mation Services, any Bitcoin trading
platform must implement compulsory
registration. Added to this, internet sites
that provide Bitcoin-related businesses
are required to comply with the anti-
money laundering obligations, such as
identifying users, and requiring users to
register using real names and their ID
numbers.59
In 2017, further actions were taken by
China in an attempt to prevent the use of
cryptocurrencies for money laundering.
In September 2017, the joint statement
Announcement of the People’s Bank of
China, the Office of the Central Leading
CRYPTOCURRENCY
Group for Cyberspace Affairs, the Min-
istry of Industry and Information Tech-
nology and Other Departments on
Preventing the Financing Risks of Initial
Coin Offerings was issued banning any
ICOs in China. 60 Again it was asserted
that no organisation is allowed to engage
in the exchange of virtual currency as legal
tender. Those platforms breaching these
rules were forced to close down. In January
2018, this was reaffirmed by the People’s
Bank of China prohibiting financial in-
stitutions from providing banking or fund-
ing facilities to any activity related to
cryptocurrencies.61Thus, in China, cryp-
tocurrency is no longer accepted as a
means of payment. Most importantly, fi-
nancial and payment institutions are
banned from holding or trading Bitcoin.
Despite the ban, as noted above, the
Chinese Government is developing its
own central bank digital currency. In 2019,
President Xi Jinping made statements sup-
porting blockchain technology as a way
to further the nation’s economic develop-
ment and announced that a new digital
currency was to be released. The proposed
digital currency will be set up as a two-tier
structure which is referred to as the digital
currency/electronic payment (DC/EP)
system. The DC/EP will replace some of
the M0 component of the central bank’s
money supply. Thus, as noted above, unlike
Bitcoin, the digital Yuan will be a fully cen-
tralised digital currency. The underpin-
nings are that it will strengthen the fiat
currency Yuan by allowing the Yuan to
be easily spent anywhere in the world.
However, still concerned about the il-
legal use of cryptocurrencies, China will
also implement real-name verification
and other measures to counter money
laundering and tax evasion. Currently,
the People’s Bank of China has stated
China is ready to trial its new digital cur-
rency,62 initially in four cities and for food
delivery platforms.63
In summary, the banning of Bitcoin is
seen as the first step in the Chinese Gov-
ernment’s issuing of its own digital currency,
which may involve cryptography as part of
the technology. The impact of the digital
Yuan on the future of Bitcoin, the domi-
nance of the United States dollar as a bench-
mark currency, and the fiat currencies of
other nations is open to conjecture.
l DECEMBER 2020 l JOURNAL OF INTERNATIONAL TAXATION 51
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:47 PM Page 52
New Zealand
Trading in cryptocurrencies in New
Zealand is relatively new. Cryptocurrencies
are not widely accepted in this jurisdiction.
The trading that does occur is mainly
through trades on unregulated, online ex-
changes. The wake-up call for New Zealand
was the collapse of Bitconia. Bitconia was
an Auckland-based currency trader. Bit-
conia’s cash and Bitcoin assets were held
in the Mt Gox exchange in Japan, which,
at the time, was the largest Bitcoin trading
exchange. 64 In February 2014, Mt Gox
suspended trading, closed its website and
exchange service, and filed for bankruptcy
protection from creditors. 65 As noted
above, it was put into liquidation in April
2014.66 Mt Gox announced that approx-
imately 850,000 Bitcoins belonging to cus-
tomers and the company were missing
and likely stolen — an amount valued at
more than USD 450 million at the time.67
The liquidation of the company
spurred government authorities to call
for regulation and, in particular in the
context of this article, for clarification as
to the tax treatment of cryptocurrencies.
The Reserve Bank of New Zealand has is-
sued concerns for “consumer protection,
anti-money laundering, and counter-ter-
rorism financing”.68 The Financial Mar-
kets Authority (FMA) warned that using
cryptocurrencies places consumers in a
risky position with the potential of being
targeted by scammers.69 Inland Revenue
also issued a series of statements as to the
nature of cryptocurrencies and the con-
sequent tax consequences. Important to
the current discussion, these authorities
have consistently asserted that cryptocur-
rencies are property and that there will
be no special regime for their regulation.70
In April 2018, Inland Revenue issued the
statement “Questions & Answers: Cryp-
tocurrencies and Tax”.71 A key aspect was
to deny cryptocurrencies as a currency at
all. 72 They are neither fiat currency nor
legal tender. They are not akin to local or
foreign currency.73 Cryptocurrencies are
property. 74 They are a commodity akin
to gold bullion.75
Taxation Aspects in the Characterisation
of Cryptocurrencies. As noted above, In-
land Revenue has asserted that there will
be no special tax regime for the regulation
52 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020
of cryptocurrencies.76 As a consequence,
the assessability of gains and losses from
cryptocurrency transactions will be treated
the same as any other business gain/loss
or profitmaking scheme gain/loss.
While those in the business of trading
in cryptocurrencies will be taxed on their
gains as the normal proceeds of business
under s CB 1 of the Income Tax Act 2007
(ITA 2007), what of those people who
merely “dabble” in trading? It is here that
the above analogy between cryptocur-
rencies and gold bullion is important as
New Zealand does not have a compre-
hensive capital gains tax (CGT). New
Zealand has ad hoc provisions that cap-
ture capital gains, 77 but only when the
transaction falls within the limited pa-
rameters of these specific sections.78 Oth-
erwise capital gains are tax-free. The
relevant specific section here is s CB 4 of
the ITA 2007. Isolated capital gains from
the sale of personal property acquired for
the purposes of resale at a profit are as-
sessable under s CB 4. The application of
this provision has been particularly dif-
ficult in the context of shares. The diffi-
culty has been ascertaining if the shares
were acquired to obtain a dividend in-
come stream (not caught under s CB 4)
or for the potential capital gain from re-
sale.79 As noted above, the value of shares
lies in part with the valuable membership
rights they confer, such as the right to
vote, the right to declared dividends and
rights to return of capital.80 By contrast,
holding gold bullion does not confer any
membership rights nor provide an income
stream. Similarly, cryptocurrencies do
not normally 81 confer any membership
rights, much less an income stream akin
to dividends or returns of capital.82 This
means in the context of s CB 4 of the ITA
2007 that the profits from the sale of cryp-
tocurrency cannot escape its reach on the
basis that it was an investment for an in-
come stream.
As noted above, using blockchain tech-
nology, each time there is a transaction83
a new link is added to the chain,84 the final
coin being this “chain” of data strings. To
incentivise the recording and sealing of
a block in the ledger, computers are re-
warded with new cryptocurrency, known
as “native tokens”.85 In turn, the process
l CRYPTOCURRENCY
of recording and sealing of blocks in the
ledger is known as “mining”.
In a recent ruling, Inland Revenue has
specifically addressed the assessability of
the benefits of “mining”.86 Inland Revenue
has asserted that those engaged in mining
do not do so in the pursuance of a hobby,
but rather in the pursuit of a profit, 87
whether that be as a business or a profit-
making scheme, and that any gains are
64
Paul Vigna, “5 Things About Mt Gox’s Crisis,” Wall
Street Journal (online ed, 25 February 2014).
65
Ben McLannahan, “Bitcoin exchange Mt Gox files for
bankruptcy protection,” Financial Times (online ed, 1
66
March 2014).
Takashi Mochizuki and Katy Stech, “Mt. Gox Files for Liq-
uidation,” Wall Street Journal (online ed, 16 April 2014).
67
Carter Dougherty and Grace Huang, “Mt. Gox Seeks
Bankruptcy After $480 Million Bitcoin Loss,”
Bloomberg News (online ed, 1 March 2014).
68
To see relevant concerns, search the Reserve Bank of
New Zealand website for the key words in the above
quote. See also Aaron Kumar and Christie Smith, Cryp-
to-currencies – An introduction to not-so-funny moneys
(Reserve Bank of New Zealand, AN2017/07, Novem-
ber 2017) at 3.
69
Financial Markets Authority, “FMA commentary on
ICOs and cryptocurrencies” (media releaseMR No 2017
– 46, 25 October 2017).
70
Inland Revenue, above n 18.
71
72
See Inland Revenue, above n 18.
Id.
73
See Inland Revenue, above n 18; and Inland Revenue,
above n 19.
74
Inland Revenue, above n 18; and Inland Revenue,
above n 19.
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:47 PM Page 53
therefore assessable. At first glance, one
might wonder whether this is true in all
cases. Could not an individual be engaged
with the concept of mining as a hobby and
the financial benefits be purely incidental?
The reality is that mining of cryptocur-
rencies such as Bitcoin requires immense
computer capacity and the consequent
expense. Hence, it is probably fair for In-
land Revenue to assume that mining is
75
Id.
76
Inland Revenue, above n 18.
77
See ss CB 6–CB 25 of the Income Tax Act 2007
regarding the taxation of capital gains from specific
land transactions.
78
The income/capital dichotomy remains strong in
the New Zealand judiciary to the extent that the
courts have not only strictly interpreted these “mini
capital gains provisions” but also included judicial
glosses that have the goal of not taxing a mere
realisation of capital: see for example, Eunson v
Commissioner of Inland Revenue [1963] NZLR 278
(SC).
79
See for example, Commissioner of Inland Revenue v
National Distributors Ltd [1989] 3 NZLR 661 (CA).
80
See commentary above n 31.
81
See commentary above n 32.
82
83
See Inland Revenue, above n 18.
Slattery, above n 2, at 836.
84
Id.
85
Garrick Hileman and Michael Rauchs, Global Cryp-
tocurrency Benchmarking Study (Cambridge Centre
for Alternative Finance, University of Cambridge, April
2017) at 13.
only pursued in a business/profit-making
context. However, it may be necessary to
readdress this matter in the future as new
ICOs might not require the energy capacity
of Bitcoin miners.
In the context of the above discussed
ad hoc CGT provisions in New Zealand,
the acquisition of native tokens could fall
under s CB 4 of the ITA 2007, being ac-
quired for the purpose of obtaining a gain
86
Inland Revenue, “Mining cryptocurrency” (2020)
<https://ird.govt.nz/>.
87
Inland Revenue, above n 87.
88
See for example, Eunson v Commissioner of Inland
Revenue [1963] NZLR 278 (SC).
89
90
See Inland Revenue, above n 19.
See Inland Revenue, “Cryptocurrency tax guidance
extended to cover employee share schemes” (media
release, 6 September 2019).
91
Inland Revenue, above n 19.
92
This reasoning extends to ICOs that purport to be
employee share schemes because, as discussed
above, cryptocurrencies do not enjoy the membership
rights attached to shares: see Inland Revenue, above
n 91. Again, Inland Revenue noted that the notion of
ICO employee share schemes is currently not a reality
in New Zealand but decided nevertheless to add clar-
ification: see Inland Revenue, above n 91.
93
See Inland Revenue, “Public Ruling BR Pub 19/02:
Income tax – bonuses paid in crypto-assets” (27 June
2019) <https://taxtechnical.ird.govt.nz/>.
94
Inland Revenue, above n 18.
95
Note in New Zealand employee related deductions
are proscribed under s DA 2(4) of the Income Tax Act
2007.
96
Inland Revenue, above n 18.
CRYPTOCURRENCY
on resale. Alternatively, s CB 3 of the ITA
2007 could apply. This section deems as-
sessable an amount that a person derives
from carrying on or carrying out an un-
dertaking or scheme entered into or de-
vised for the purpose of making a profit.
Again, while the New Zealand courts have
added judicial glosses to limit the scope
of this provision,88 it nevertheless looks
particularly apt in the context of mining.
In a recent ruling, Inland Revenue de-
termined that employees regularly paid in
Bitcoin were subject to taxation under s
CE 1 of the ITA 2007 as “salary and wages”
and thus subject to pay-as-you-earn
(PAYE).89 Inland Revenue has stated that
payment in cryptocurrency is rare in New
Zealand, but in light of a few enquiries it
decided to add some clarification.90 In a
rather, arguably unnecessarily, lengthy
Public Ruling — BR Pub 19/01: Income
Tax – Salary and Wages Paid in Crypto-
Assets — it was concluded that, despite its
non-monetary nature, payments in Bitcoin
are “money’s worth” and thus should be
assessed as salary and wages,91 rather than
other suggestions whereby they would be
treated as employee share schemes. 92 A
more recent ruling has concluded the same
in regard to bonuses paid in Bitcoin.93
As noted above, Inland Revenue has
asserted that there will be no special tax
regime for the regulation of cryptocur-
rencies. 94 As a consequence, losses will
be treated the same as any business loss
or profit-making scheme loss. Specifically,
deductions will be available for business
expenditure under s DA 1 of the ITA
2007 and for profit-making schemes
under s DB 23 of the ITA 2007.95 Notably,
the issue of the deductibility of mining
expenses has not been addressed apart
from Inland Revenue acknowledging
that computers can be depreciated under
s DA 1 (and Subpt EE) of the ITA 2007.96
Other expenses such as electricity, a sub-
stantial portion of the running mining
expenses, have not specifically been ad-
dressed.
A key point to the analysis in this article
is whether regulatory authorities remain
consistent in their characterisation of cryp-
tocurrencies for all purposes. This becomes
particularly critical in the context of taxation.
Will the revenue authorities apply the same
classification for all tax purposes or pick
l DECEMBER 2020 l JOURNAL OF INTERNATIONAL TAXATION 53
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 54
and choose what suits the particular narrative
— income tax v GST/VAT? It ultimately
comes down to being consistent or “schiz-
ophrenic”. New Zealand has consistently
chosen the first path of consistency, subject
to a minor clarification discussed below.
Cryptocurrencies are a commodity, not a
currency, for all purposes. As a consequence,
it is a commodity subject to GST. It is not
an exempt currency; thus, GST must be
charged on all transactions involving a trans-
fer of ownership of cryptocurrencies. The
obvious example is the sale of cryptocur-
rencies, but it should also apply to purchases
using cryptocurrencies as they are not legal
tender. Effectively, such transactions involve
a barter where the cryptocurrency is being
used to pay in exchange for the item pur-
chased.97 In New Zealand, Inland Revenue
has released guidance for those accepting
cryptocurrencies advising how to calculate
the GST on such transactions.98
Anti-Money Laundering and Counter-Ter-
rorism Financing Measures. As stated above,
New Zealand has not enacted specific leg-
islation to deal with cryptocurrencies. This
is also true in the context of the concerning
use of cryptocurrencies for illegal purposes
such as money laundering and terrorism
financing. Instead, the New Zealand reg-
ulatory authorities apply the unmodified
Anti-Money Laundering and Countering
Financing of Terrorism Act 2009. As the
Act states, its purpose is to, inter alia, “detect
and deter money laundering and the fi-
nancing of terrorism”.99 It provides for a
disclosure regime for reporting entities,
such as “customer due diligence”,100 ac-
count monitoring,101 and suspicious trans-
54 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020
action102 reporting requirements. The en-
forcement of these regulations is supported
by a framework to detect and deter money
laundering and terrorism financing and
consequent civil and criminal offences
where there are breaches.103 These ground-
level obligations placed on financial insti-
tutions are in turn supported by a
mechanism of supervision, monitoring
and enforcement of anti-money laundering
and countering financing of terrorism
(AML/CFT) obligations by three supervi-
sory bodies, namely, the Reserve Bank of
New Zealand, the Financial Markets Au-
thority and the Department of Internal
Affairs. Under s 7 of the Act the regime
extends to amounts that are not in New
Zealand currency and thus would capture
transactions involving cryptocurrencies.
In summary, the approach taken in
New Zealand has two notable benefits.
First, it has used existing legal frameworks
despite the unique nature of cryptocur-
rencies. This has the obvious benefits of
simplicity in contrast to the possible com-
plexity and potential for unintended con-
sequences if legislation was amended to
accommodate cryptocurrencies or, further
still, if a separate regulatory regime was
introduced. Second, consistently main-
taining that cryptocurrencies are not a
currency, not legal tender, but rather prop-
erty for all purposes means that all regu-
latory regimes can take a consistent
approach and work together towards a
common approach to cryptocurrencies.
It will be seen this is not the case in Aus-
tralia. As a consequence, the ideal of a
common Trans-Tasman approach to cryp-
tocurrencies is not currently plausible.
l CRYPTOCURRENCY
Australia
Characterising cryptocurrencies or digital
currencies under Australian law remains
a particular pre-occupation of Australian
regulators. The main issues grappled by
Australian regulators relate to whether
cryptocurrencies are a currency or a com-
modity under tax law and whether they
are a financial product under tax and cor-
porations law. The categorisation adopted
for cryptocurrencies is important as it
could lead to different outcomes in rela-
tion to taxation, financial and consumer
protection regulation. In addition, how
cryptocurrencies are regulated under anti-
money laundering and counter-terrorism
legislation will depend on the character-
isation of such as money or something
that is equivalent to money.
The Australian Taxation Office (ATO)
has led the government position on the
legal characterisation of cryptocurrencies
such as Bitcoin. On 20 August 2014, it is-
sued a suite of draft tax rulings that outline
the legal treatment of Bitcoin. 104 These
tax rulings, which were finalised on 17
December 2014, consider whether Bitcoin
could be regarded as money under Aus-
tralian law and considered the income,
GST and fringe benefit tax (FBT) conse-
quences of transactions involving cryp-
tocurrencies.
Taking the viewpoint that the treat-
ment of Bitcoin needs to be consistent
with established legal principles, the ATO
concluded that it could not be categorised
as a “currency” or “foreign currency”.105
In forming this opinion, reference was
made to Leask v Commonwealth where
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 55
the Court asserted that “currency consists
of notes or coins of denominations ex-
pressed as units of account of a country
and is issued under the laws of that country
for use as a medium of exchange of
wealth”.106 Supporting this viewpoint, s
8 of the Currency Act 1965 (Cth) defines
Australian currency and foreign currencies
as a unit of account recognised by the gov-
ernment in Australia and overseas juris-
dictions. On this basis, it was concluded
that Bitcoin does not constitute a currency
or foreign currency under Australian law.
While the ATO acknowledged that the
Australian courts have taken a functional
approach to defining money as a “generally
accepted medium and means of exchange,
without being legal tender”,107 Bitcoin has
yet to be a generally accepted medium
and means of exchange and thus, cannot
be considered to be money.108
97
98
Inland Revenue, above n 18.
Id.
99
Anti-Money Laundering and Countering Financing of
Terrorism Act 2009, s 3.
100
See Anti-Money Laundering and Countering Financ-
ing of Terrorism Act 2009, pt 2, subpt 1.
101
Anti-Money Laundering and Countering Financing of
Terrorism Act 2009, s 31.
102
Anti-Money Laundering and Countering Financing of
103
Terrorism Act 2009, pt 2, subpt 2.
Anti-Money Laundering and Countering Financing of
Terrorism Act 2009, pt 3.
104
See Australian Taxation Office, “Tax treatment of
cryptocurrencies in Australia – specifically bitcoin” (30
March 2020) <www.ato.gov.au/>.
105
Australian Taxation Office, “TD 2014/25: Income tax:
is bitcoin a ‘foreign currency’ for the purposes of Divi-
sion 775 of the Income Tax Assessment Act 1997?” (14
December 2014) <www.ato.gov.au/>.
106
Australian Taxation Office, above n 106, at [18], quoting
Leask v The Commonwealth [1996] HCA 29, (1996) 187
CLR 579.
So, if it is not currency how is it char-
acterised? Subject to its recharacterisation
for GST purposes, discussed below, the
ATO has stated that for income tax and
CGT purposes it is property, an asset.109
As noted in TD 14/26, Bitcoin is a digital
representation of value and Bitcoin hold-
ers have rights of control over the Bitcoin
in the holder’s Bitcoin wallet, as well as
the capacity to trade Bitcoin. 110 This fits
quite neatly into the definition of prop-
erty in Australia. Consequently, gains
from the sale of cryptocurrencies will be
treated as business income, transactions
utilising cryptocurrencies will be treated
as bartering arrangements, and for non-
business transactions it is treated as prop-
erty within the definition of a GGT asset
(s 108-5 of the Income Tax Assessment
Act 1997 (Cth, ITAA 1997)) and the sale
taxable under CGT Event A1 (s 104-10
107
Australian Taxation Office, above n 106, at [20], quoting
Emmett J in Travelex Limited v FCT [2008] FCA 1961,
(2008) 71 ATR 216.
108
Australian Taxation Office, above n 106, at [24].
109
Australian Taxation Office “TD 2014/26” Income tax:
is bitcoin a ‘CGT asset’ for the purposes of subsection
108-5(1) of the Income Tax Assessment Act 1997?” (17
December 2014) <www.ato.gov.au/>.
110
Australian Taxation Office, above n 110.
111
Id.
112
See the relatively new definition of “digital currency”
in s 195-1 of the A New Tax System (Goods and Serv-
ices Tax) Act 1999 (Cth), introduced by the Treasury
Laws Amendment (2017 Measures No 6) Act 2017
(Cth).
113
Australian Taxation Office, “Cryptocurrency used in
business” (30 March 2020) <www.ato.gov.au/>.
114
Australian Taxation Office, above n 114.
115
Australian Taxation Office, above n 110.
116
Australian Taxation Office, above n 114.
117
Australian Taxation Office, above n 110.
CRYPTOCURRENCY
of the ITAA 1997 (Cth)) as the disposal
of an asset. 111
As noted above, bowing to the pressure
of the Fintech lobby in Australia, this ju-
risdiction has now adopted a schizo-
phrenic approach where cryptocurrencies
have different characteristics depending
on their taxation and legal context. While
it was initially established that cryptocur-
rencies were property, not currency for
all tax purposes, it will be seen that in
2017, the Australian Government did a
“back flip” and recharacterised cryptocur-
rencies as a “digital currency”112 so as to
make it effectively an exempt supply under
the GST. This is explored in detail below.
Taxation Aspects in the Characterisation
of Cryptocurrencies. As Bitcoin is not a
currency for income and CGT purposes,
transactions involving Bitcoin for the pur-
pose of sale or exchange in the ordinary
course of a business are considered trading
stock for the purposes of s 70-10(1) of the
ITAA 1997 (Cth) and a deduction for
holding and adding stock may be claimed
as a deduction based on the market value
of the item acquired.113 This equally applies
to mining. Native tokens may be treated
as trading stock and gains taxed as ordi-
nary income. Thus, if a taxpayer acquires
a cryptocurrency with the purpose of prof-
iting from it upon a commercial transfer,
any gain will be taxed on its disposal under
s 6-5 of the ITAA 1997 (Cth).114
For transactions using cryptocurrencies
as a means of payment, the ATO deter-
mines that “transactions involving Bitcoin
give rise to the same tax consequences as
other barter transactions”.115 Businesses
that accept cryptocurrencies in payment
for goods and services need to include the
Australian dollar equivalent of the cryp-
tocurrency as ordinary income. The ATO
has advocated that “[o]ne way of deter-
mining the value in Australian dollars is
the fair market value which can be ob-
tained from a reputable cryptocurrency
exchange”.116
As noted above, in TD 14/26, the ATO
further stated that Bitcoin transactions
may be subject to CGT.117 It is treated as
property within the definition of a CGT
asset (s 108-5 of the ITAA 1997 (Cth))
and the sale taxable under CGT Event A1
(s 104-10 of the ITAA 1997 (Cth)) as dis-
l DECEMBER 2020 l JOURNAL OF INTERNATIONAL TAXATION 55
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 56
posal of an asset.118 This applies to ICOs,
not just those cryptocurrencies acquired
through trading. Tokens acquired through
an ICO are considered an asset for tax
purposes and any capital gains arising
that may be subject to CGT as a token are
taken to be disposed when they are sold,
traded or exchanged.119 As a capital asset,
the ATO views that the theft of Bitcoin
or the loss of a private key is a disposal in
respect to which a capital loss may be
claimed.120
While it has been asserted that cryp-
tocurrencies may be considered an exempt
personal use asset within s 108-20 of the
ITAA 1997 (Cth) when it is used as a pay-
ment to acquire a personal asset such as
music or clothing, cryptocurrencies that
are kept or used mainly for the purpose
of profit-making or for investment will
not be personal use assets and any pro-
ceeds from their sale will be subject to
CGT.121 This would include non-business
mining. This has been confirmed in sub-
sequent posts on the “ATO community”
discussion thread. 122 According to the
posts and other public information pro-
vided by the ATO, native tokens obtained
in mining activities cannot meet the per-
sonal use asset requirements on disposal.123
Similarly, selling Bitcoin for fiat currency,
or paying through a “payment gateway or
bill payment intermediary”, will not qualify
for the personal asset exclusion.124 An in-
dividual taxpayer who mines cryptocur-
rencies and keeps the native tokens for a
number of years with the intention of sell-
ing them at opportune times based on
favourable rates of exchange will be sub-
jected to CGT under this tax determina-
tion. As noted above, this may be assessed
under s 6-5 of the ITAA 1997 (Cth). If
that is the case, any capital gain arising
under CGT event A1 will be correspond-
ingly reduced under s 118-20.125 The issue
of mining has been addressed above and
is also considered below in the South
African context. Contrary to the approach
in New Zealand, the ATO’s approach sug-
gests that not all mining occurs in a trading
context but might also be caught under
the CGT regime.
The ATO also provides guidance in
relation to a “chain split”, sometimes re-
ferred to as a “Bitcoin fork”, which involves
a split in the Bitcoin network that can re-
56 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020
sult in the creation of new coins that can GST Act 1999 (Cth) to ensure that sup-
be claimed by existing Bitcoin owners. plies of cryptocurrencies, such as Bitcoin,
The ATO’s view is that an investor in such received equivalent GST treatment to
a situation will “not derive ordinary in- supplies of money. To be more specific,
come or make a capital gain at that time supplies and acquisitions using digital
as a result of receiving the new cryptocur- currencies are exempt from GST. Trans-
rency”.126 A capital gain is made on dis- actions involving the use of digital cur-
posal of the asset, and if the investment rencies to sell or acquire digital
is held for 12 months or more, the CGT currencies will still be subject to GST.
discount can apply. The cost base of a new There is still some uncertainty how this
cryptocurrency received as a result of a will apply to ICOs.134 An obvious gap in
chain split is zero.127
Another area of controversy is the GST
treatment of Bitcoin and other cryptocur-
rencies. As discussed below, the Govern-
ment reversed the ATO’s original position
of the status of cryptocurrencies in the
GST context. The authors suggest that
this change has the potential of requiring
the current legal framework of taxing Bit-
coin transactions be revisited. In Australia,
the supply of money is an input tax finan-
cial supply,128 effectively making it exempt
from GST unless there is a supply of
money for money, that is, where a foreign
currency conversion occurs. Working
from the basis of existing law, the ATO
in 2014 took the position that Bitcoin is
not a foreign currency or “money” as it
was not legal tender.129 Accordingly, the
transfer of Bitcoin was a “supply” for GST
purposes. The consequence of this treat-
ment of cryptocurrencies was, however,
a potential for double taxation of GST
when the goods or services were being
provided, in addition to the “supply” of
the digital currency when it is used as a
payment. this discussion is whether the parties are
In 2015, a Senate Economic Reference required to be registered for GST, as this
Committee Inquiry into digital curren- will determine the GST treatment.
cies considered this matter. 130 This in- In furtherance of this amendment, the
quiry received submissions from many Government included a new form of cur-
organisations concerned that such GST rency into the GST Act 1999 (Cth), “digital
treatment would result in many cryp- currency”:135 digital currency means dig-
tocurrency businesses fleeing Australia ital units of value that:
as a place of business.131 This “lobbying” (a) are designed to be fungible; and
appears to have had the desired effect.132 (b) can be provided as *consideration for a
In 2016, the Australian Government re- supply; and
leased the “Backing Australian Fintech” (c) are generally available to members of the
statement, in which it supported ad- public without any substantial restric-
dressing this potential double taxation tions on their use as consideration; and
effect and working with industry to con- (d) are not denominated in any country’s
sider reform options. 133 In 2017, the currency; and
Treasury Laws Amendment (2017 Meas- (e) do not have a value that depends on, or
ures No 6) Bill 2017 (Cth) amended the is derived from, the value of anything
definition of “supply” in s 9-10(4) of the else; and
l CRYPTOCURRENCY
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 57
(f) do not give an entitlement to receive, or
to direct the supply of, a particular thing
or things, unless the entitlement is inci-
dental to:
1. holding the digital units of value; or
2. using the digital units of value as consid-
eration; but does not include:
(i) *money; or
(ii) a thing that, if supplied, would be a
*financial supply for a reason other
than being a supply of one or more
118
Id.
119
Australian Government, The Treasury, Initial Coin Offer-
ings: Issues Paper (January 2019).
120
Australian Taxation Office, above n 105.
121
Australian Taxation Office, above n 110.
122
ATO Community, “Confused about tax on cryptocurrency”
(15 December 2017) <https://community.ato.gov.au/
t5/Cryptocurrency/Confused-about-tax-on-
cryptocurrency/td-p/2343>.
123
ATO Community, “Knowledge Base: Mining cryptocur-
rency” (5 September 2019) <https://community
.ato.gov.au/t5/Tax/Mining-cryptocurrency/ta-p/4599>.
124
Australian Government, The Treasury, above n 120.
125
Australian Taxation Office, above n 110.
126
Australian Taxation Office, “Transacting with cryptocur-
rency: Chain splits” (30 March 2020) <www.ato.gov.au/>.
127
Australian Taxation Office, above n 127.
128
Section 40-5 of the A New Tax System (Goods and
Services Tax) Act 1999 (Cth).
129
Australian Taxation Office, “Goods and Services Tax
Ruling GSTR 2014/3W: Goods and services tax: the
GST implications of transactions involving bitcoin” (18
December 2017) <www.ato.gov.au/>. This position
digital units of value to which para-
graphs (a) to (f) apply.
This definition may be useful in other
jurisdictions that wish to establish a separate
regime for the regulation of cryptocurren-
cies. As a consequence, cryptocurrencies
have been accorded different characteristics
depending on whether we are dealing with
income tax, CGT or GST. For the reasons
already touched upon, this difference in
characterisation is not desirable. A common
was reiterated in its submissions to the Senate Eco-
nomics References Committee Inquiry into digital cur-
rencies and the Committee’s final report: see
Parliament of Australia, “Submissions received by the
Committee” <www.aph.gov.au/Parliamentary_
Business/Committees/Senate/Economics/Digital_
currency/Submissions>; and Senate Economics Ref-
erences Committee, Digital currency—game changer
or bit player (Senate Printing Unit, August 2015).
130
Senate Standing Committees on Economics, “Digital
currency,” Parliament of Australia <www.aph.gov.au/>.
131
See Parliament of Australia, above n 130.
132
It has been suggested that the change in policy was
influenced by the EU ruling in Skatteverket v David
Hedqvist (2015) ECLI:EU:C:2015:718 where it was
determined that the exchange of cryptocurrencies
for fiat currency was an exempt supply in terms of
art 135(1)(e) of the VAT Directive (2006/112): see
Shaun Parsons and Craig West, “The issues and
challenges that crypto-assets represent for the
international tax system” (unpublished manuscript).
The authors do not agree. Obviously, the ruling is
not binding in Australia. More importantly, the Sen-
ate Economics References Committee Final Report
recognised the varying approaches taken in a num-
CRYPTOCURRENCY
characterisation used in all aspects of reg-
ulatory activities is preferable. It is surpris-
ing that given the limited acceptance of
cryptocurrencies in Australia, and hence
the limited impact of the application of
GST to cryptocurrencies, that the Aus-
tralian Government would prioritize the
submissions of the Fintech industry at the
expense of a consistent approach at all reg-
ulatory levels.
Anti-Money Laundering and Counter-
Terrorism Financing Measures. The Aus-
tralian Government has been concerned
that the anonymous peer-to-peer nature
of the Bitcoin payment system may create
money laundering and terrorism financing
opportunities. The Reserve Bank of Aus-
tralia first noted these concerns in 2013.136
Australia has anti-money laundering and
counter-terrorism financing legislation
in the form of the Anti-Money Laundering
and Counter-Terrorism Financing Act
2006 (Cth, AML/CFT Act 2006). However,
this legislation could not be applied to
stem money laundering through cryp-
tocurrencies, such as Bitcoin, as it also
adopted the existing definition of “money”,
namely, currency that was backed by a
sovereign state. In 2015, the above dis-
cussed Senate Economics References Com-
mittee Inquiry recommended that the
AML/CFT Act 2006 (Cth) be amended to
bring digital currency within its regime.137
In 2017, the Anti-Money Laundering and
Counter-Terrorism Financing Amend-
ber of jurisdictions and there is no reference to this
EU decision in the Treasury’s Report: see Senate
Economics References Committee, above n 130, at
[2.13]; and Australian Government, The Treasury,
“Australia’s FinTech priorities” (18 March 2016)
<https://treasury.gov.au>. Ultimately, these reports
make it clear it was the concerns of the Fintech lobby
that held sway.
133
Australian Government, The Treasury, above n 133.
134
Australian Taxation Office, “GST and digital currency”
(16 March 2018) <www.ato.gov.au/>.
135
See the relatively new definition of “digital currency”
in s 195-1 of the A New Tax System (Goods and Serv-
ices Tax) Act 1999 (Cth), introduced by the Treasury
Laws Amendment (2017 Measures No 6) Act 2017
(Cth).
136
See the Reserve Bank of Australia, “Annual Report
2013: Risk Management” <www.rba.gov.au/>. See
also its submission to the Senate Economics Refer-
ences Committee: Parliament of Australia, above n
130.
137
Senate Economics References Committee, above n
130, at [6.37].
l DECEMBER 2020 l JOURNAL OF INTERNATIONAL TAXATION 57
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 58
ment Act 2017 (Cth) was passed, which
expanded the coverage of the AML/CFT
Act 2006 (Cth) to include digital curren-
cies.138 It did this by providing a separate
definition of “digital currency” in s 5, dis-
tinct from the definition of “money”. Dig-
ital currency, under the new legislation,
is defined as, inter alia, a “digital repre-
sentation of value that … functions as a
medium of exchange, a store of economic
value, or a unit of account”.139 The defi-
nition continues by making it clear that it
“is not issued by or under the authority of
a government body”. Digital currency is
also defined as being interchangeable with
money and publicly available.
The new legislation requires digital
currency exchange services (DCES)140 to
enroll in a register maintained by the Aus-
tralian Transaction Reports and Analysis
138
Anti-Money Laundering and Counter-Terrorism
Financing Amendment Act 2017 (Cth).
139
Section 5 of the Anti-Money Laundering and Count-
er-Terrorism Financing Act 2006 (Cth), as amended
by s 3 of the Anti-Money Laundering and Counter-
Terrorism Financing Amendment Act 2017 (Cth).
140
See further pt 6A, Div 1 of the Anti-Money Laundering
and Counter-Terrorism Financing Act 2006 (Cth), as
amended by the Anti-Money Laundering and Count-
er-Terrorism Financing Amendment Act 2017 (Cth).
141
See further pt 6A, Div 3 of the Anti-Money Laundering
and Counter-Terrorism Financing Act 2006 (Cth), as
amended by the Anti-Money Laundering and Count-
er-Terrorism Financing Amendment Act 2017 (Cth).
142
See further pt 6A, Div 2 of the Anti-Money Laundering
and Counter-Terrorism Financing Act 2006 (Cth), as
amended by the Anti-Money Laundering and Count-
er-Terrorism Financing Amendment Act 2017 (Cth).
143
See further pt 6A, Div 2 of the Anti-Money Laundering
and Counter-Terrorism Financing Act 2006 (Cth), as
amended by the Anti-Money Laundering and Count-
er-Terrorism Financing Amendment Act 2017 (Cth).
144
Australian Federal Police and AUSTRAC “One man
charged and two cryptocurrency businesses suspend-
58 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020 l CRYPTOCURRENCY
Centre (AUSTRAC).141 Once registered,
DCES are required to collect and store
information on customers’ identities and
transactions, and to have a system to mon-
itor suspicious activity. They must report
any suspicious transactions over AUD
10,000 and establish an AML/CFT com-
pliance programme. There are consider-
able penalties under s 76A of the
AML/CFT Act 2006 (Cth) for breaches
of the registration requirements and con-
sequent reporting and monitoring obli-
gations.142 Under the AML/CFT Act 2006
(Cth), fines of up to AUD 105,000 and/or
two years’ imprisonment may be imposed
for any person providing unregistered
DCES services or breaching a condition
of their registration. This penalty doubles
if the breach occurs after receiving com-
pliance directions from the AUSTRAC
ed following organised crime investigation” (media
release, 8 March 2019); and Victoria Police and AUS-
TRAC “Man arrested as part of cryptocurrency inves-
tigation” (media release, 12 November 2019).
145
See the Reserve Bank of Australia, above n 137. See
also its submission to the Senate Economic Reference
Committee: see Parliament of Australia, above n 130.
146
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [4.2.2.3].
147
National Treasury, “User Alert: Monitoring of virtual
currencies” (media release, 18 September 2014).
148
National Treasury, above n 148.
149
Id.
150
Id.
151
South African Reserve Bank, National Payment Sys-
tem Department, above n 45, at [1.1.2]
152
South African Reserve Bank, National Payment Sys-
tem Department, above n 45, at [4.1].
153
Id.
154
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [4.2.2.3].
155
Id.
CEO or there is a breach of a compliance
undertaking. If a second breach occurs,
the penalty is seven years’ imprisonment
and/or an AUD 420,000 fine.143 Following
the enactment of the new law, the Aus-
tralian Federal Police and AUSTRAC have
arrested two people and suspended three
cryptocurrency businesses for breaching
s 76A and other criminal laws in dealing
with the proceeds of crime.144
The emergence of Bitcoin, with the
risk of money laundering and terrorism
financing, has necessitated amendments
be made to the AML/CFT legislation. It
is interesting that in expanding the
AML/CFT Act 2006 (Cth) to cover cryp-
tocurrencies, such as Bitcoin, the Aus-
tralian Government has continued to treat
digital currency as a separate class to that
of money, an indication that it does not
156
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [4.1.1].
157
Id.
158
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [4.2.2.3].
159
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [1.2.5].
160
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [1.1.3].
161
IFWG Crypto Assets Regulatory Working Group, above
n 3, at [4.2.2.3].
162
IFWG Crypto Assets Regulatory Working Group, above
n 3, at [1.2.5].
163
Id..
164
South African Revenue Service, above n 12. See also
South African Revenue Service “FAQS: Cryptocurren-
cies” (4 April 2018) <www.sars.gov.za/AllDocs/Doc-
uments/Legal/FAQs%20-%20Cryptocurrencies.pdf>.
165
South African Revenue Service, above n 12.
166
South African Revenue Service, above n 12. See further
the discussion of this issue in IFWG Crypto Assets Reg-
ulatory Working Group, above n 3, at [5.2], also
addressed below.
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 59
regard cryptocurrencies as equivalent to
money issued by government bodies. In
summary, Australian regulators have
struggled to adopt a consistent charac-
terisation of cryptocurrencies under, inter
alia, taxation laws, leading to policy-related
consequences. It is strange that, given how
limited the use and acceptance of Bitcoin
is as a mechanism of trade or investment
in Australia, 145 the Government would
succumb to the pressure of the Fintech
industry at the expense of a singular char-
acterisation of cryptocurrencies for all
legal purposes.
South Africa
As in New Zealand, cryptocurrencies are
not widely accepted as a means of payment
in South Africa. 146 This has allowed South
African authorities to be very cautious in
their approach to the question of what, if
any, regulatory framework is suitable for
the advent of cryptocurrencies in this ju-
risdiction. South African authorities are
mindful of the risks posed by cryptocur-
rencies. The first public statement on cryp-
tocurrencies was issued by the National
Treasury (NT) in 2014 as a joint initiative
with the South African Reserve Bank
(SARB), the Financial Services Board (now
the Financial Sector Conduct Authority
(FSCA)), the South African Revenue Serv-
ice (SARS) and the Financial Intelligence
Centre (FIC). 147 The public statement
warned members of the public about the
risks associated with the use of cryptocur-
rencies for the purpose of transacting or
investing. 148 It advised users to take ex-
treme caution, noting that no legal pro-
tection or recourse is offered to users of,
or investors in, cryptocurrencies.149 Es-
sentially, the authorities had asserted a
“buyer beware” position for consumers,
reinforcing that “all activities related to
the acquisition, trading or use of crypto
assets are done at the end users’ sole and
independent risk, with no recourse to the
SARB”. 150 The SARB, through the Na-
tional Payment System Department, is-
sued a further position paper on
cryptocurrencies in 2014.151 The position
paper highlighted the risks surrounding
cryptocurrencies from their illegal use,152
in particular for money laundering and
financing of terrorism.153
In light of the risks involved with cryp-
tocurrencies, the South African authorities
are equally concerned that if they were to
intervene and create a regulatory frame-
work for cryptocurrencies this would po-
tentially create a “perception of regulatory
acceptance or the endorsement of such
instruments”.154 Apart from the fact that
this might be perceived as endorsing the
illegal use of cryptocurrencies, any such
endorsement as a legitimate means of pay-
ment might have the consequence of in-
creasing the value of cryptocurrencies.155
As noted above, there is concern that if
the market capitalisation of cryptocur-
rencies increases in South Africa, it could
destabilise the domestic monetary sys-
tem.156 It might create a parallel monetary
system that could compete with and thus
threaten the stability of the Rand.157 Thus,
authorities have warned of the need to
carefully reflect on the appropriateness
CRYPTOCURRENCY
of regulatory intervention and potential
unintended consequences (i.e., this im-
plicit endorsement).158
South African authorities have been
mindful of the need for a coherent regula-
tory approach at a national level and the
need for a coordinated global approach.159
As indicated above, in 2016 the South
African Government formed the Intergov-
ernmental FinTech Working Group
(IFWG) comprising members from NT,
SARB, FSCA and FIC. The aim of the IFWG
is to “develop a common understanding
among regulators and policymakers of fi-
nancial technology (Fintech) developments
as well as policy and regulatory implications
for the financial sector and economy”.160
At the start of 2018, a joint working group,
represented by members of the IFWG and
SARS, was formed under the auspices of
the IFWG to review the position on cryp-
tocurrencies. This working group produced
its Consultation Paper on Policy Proposals
for Crypto Assets.161 This document pro-
vides the foundation for a common regu-
latory approach to the legal treatment of
cryptocurrencies in South Africa.
As to the call for a consistent global ap-
proach to the regulation of cryptocurren-
cies, as the IFWG notes, the approaches to
cryptocurrencies vary across jurisdictions,
ranging from that in China, effectively ban-
ning cryptocurrencies, to nations such as
Japan “explicitly allow[ing] its use and
trade” and those in between “restricting”
or “monitoring … and issu[ing] warnings”
but not declaring it illegal.162 The IFWG
calls for a global approach on issues of con-
ceptualisation, definition and regulatory
approach are significant.163 Nations such
as Australia and New Zealand have focused
purely on domestic regulation without
recognising the need for a coordinated ap-
proach either regionally, such as in the
Trans-Tasman or Asia Pacific, or wider
through institutions such as the OECD.
This is a matter to which the authors wish
to give greater attention in future research.
Echoing the position in New Zealand,
SARS has asserted that cryptocurrencies
are neither “currency” nor “legal tender”.164
As discussed below, it is considered an
“asset of an intangible nature”.165 In ad-
dition, South Africa has made strong state-
ments that existing laws will apply to
cryptocurrencies.166 Further to this policy
l DECEMBER 2020 l JOURNAL OF INTERNATIONAL TAXATION 59
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 60
stance, South Africa had initially made
only minor legislative changes to accom-
modate cryptocurrencies in its CGT and
money laundering regimes.167 However,
as discussed below, it has recently legislated
to exempt cryptocurrencies from VAT
by adding same to the definition of “fi-
nancial services”.168 However, the explana-
tory memorandum maintains that this
was simply to clarify the existing posi-
tion.169 This is discussed further below.
To date, South Africa has chosen not
to ban ICOs, trading or payments transfers
in cryptocurrencies.170 However, the IFWG
Crypto Assets Regulatory Working
Group 171 has signaled that South Africa
will effect a “limited regulatory” framework
for cryptocurrencies, particularly aimed
at regulating “virtual assets” for consumer
protection, counter-terrorism financing
and anti-money laundering purposes.172
As discussed below in the context of
AML/CFT, it has proposed a gradual ap-
proach towards a specific regulatory frame-
work for the licensing of cryptocurrency
exchanges.
Taxation Aspects in the Characterisation
of Cryptocurrencies. As noted above,
SARS has asserted that cryptocurrencies
are not regarded as “currency” for income
tax or CGT purposes.173 It is considered
an “asset of an intangible nature”174 and
any gains made from trading in cryptocur-
rencies are included in a taxpayer’s “gross
income”.175 Equally, expenditure incurred
in the production of such income and for
the purposes of trade will be deductible.176
As discussed above, these costs could be
quite significant in the context of mining.
SARS has an interesting take on native
tokens earned through mining, asserting
they are held as trading stock.177 Implicit
in this statement is that mining is only
engaged by persons in the course of trade.
As discussed above, mining Bitcoin178 re-
quires immense computer capacity and
the consequent expenses; thus, it is prob-
ably accurate to say that it is only pursued
in a business/profit-making context. In
turn, that trading stock can ultimately be
realised through cryptocurrency ex-
changes or through barter exchanges for
goods or services. 179 With regard to the
latter point, there is a cryptic comment
in SARS’s statement that the “normal
60 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020
barter transaction rules apply”.180 What
are these rules? There are no specific rules
delineated in the Income Tax Act 58 of
1962 (South Africa) pertaining to barters.
Possibly this simply pertains to common
law principles as to the income nature of
bartering transactions.
What if the acquisition of a cryptocur-
rency is not in the nature of trade, but
rather a capital investment? Any gains will
be taxed under the CGT provisions con-
tained in the Eighth Schedule of the In-
come Tax Act 58 of 1962 (South Africa).181
Again, any relevant expenditure will be
allowed through an adjustment to the cost
base.182 SARS has asserted that whether
gains will be treated as revenue in nature
or capital will be determined by a wealth
of existing case law, rather than special
rules delineated for cryptocurrencies.183
167
Two amendments in 2019 are worthy of note. Cryp-
tocurrencies were included in the definition of “finan-
cial instrument” for the purposes of CGT, so that they
could not be considered an exempt personal use
asset (Taxation Laws Amendment Act 2019 (South
Africa)) and trading was included within the notion
of suspect trades within s 20A of the Income Tax Act
58 of 1962 (South Africa) to ensure that they fall
within the parameters of existing money laundering
laws: Taxation Laws Amendment Act 2019 (South
Africa).
168
Taxation Laws Amendment Act 2019 (South Africa),
amending the definition of “financial services” in s 2
169
of the Value-Added Tax Act 1991 (South Africa).
See National Treasury, Explanatory Memorandum on
the Taxation Laws Amendment Bill 2018 (January 2019).
170
IFWG Crypto Assets Regulatory Working Group, above
n 3, at [2.1.2] and [4.2.2.1].
171
IFWG Crypto Assets Regulatory Working Group, above
n 3, at [5.2].
172
See further the discussion of this issue in IFWG Crypto
Assets Regulatory Working Group, above n 3, at [4.1.2]
and [5.2].
l CRYPTOCURRENCY
SARS has also indicated that cryp-
tocurrencies paid to independent con-
tractors or to employees as remuneration
are considered “self-employment income”
and “employment income”, respectively,
and are subject to normal taxation rules.184
As in New Zealand, this would be a rare
occurrence in South Africa but was in-
cluded in the SARS document in response
to queries from the public.
While the South African authorities
have stated that existing laws will apply to
cryptocurrencies, it amended its Income
Tax Act 58 of 1962 (South Africa) in 2019
to include cryptocurrencies within the def-
inition of a “financial instrument”.185 This
amendment has a number of consequences,
particularly making certain provisions that
provide special rules for financial instru-
ments applicable to cryptocurrencies.186
173
South African Revenue Service, above n 12.
174
Id.
175
See the definition of “gross income” within s 1 of the
176
Income Tax Act 58 of 1962 (South Africa).
177
South African Revenue Service, above n 12.
Id.
178
As noted above, it may be necessary to readdress this
matter in the future as new ICOs might not require
179
the energy capacity of Bitcoin miners.
South African Revenue Service, above n 12.
180
Id.
181
Id.
182
Id.
183
Id.
184
South African Revenue Service, above n 165.
185
186
Taxation Laws Amendment Act 2019 (South Africa).
Id.
187
Id.
188
Taxation Laws Amendment Act 2019 (South Africa),
amending the definition of “financial services” in s 2
of the Value-Added Tax Act 1991 (South Africa).
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 61
Most importantly, the amendment was
triggered by the above discussion in Aus-
tralia as to whether cryptocurrencies could
be characterised as an exempt personal use
asset. The characterisation as a “financial
instrument” ensures that cryptocurrencies
will not receive concessional CGT treat-
ment as a personal use asset.
The second amendment to the Income
Tax Act 58 of 1962 (South Africa) in 2019
is significant in the context of the above
discussed “buyer beware” approach. The
amendment included the “acquisition or
disposal of any cryptocurrency” as a “sus-
pect trade” within s 20A. 187 This has the
effect of ring-fencing cryptocurrency losses
in certain circumstances. Suspect trades
apply to situations where losses are more
probable and profit motive might be more
questionable. Cryptocurrencies fit neatly
189
Taxation Laws Amendment Act 2019 (South Africa),
amending the definition of “financial services” in s 2
190
of the Value-Added Tax Act 1991 (South Africa).
191
See National Treasury, above n 170.
See further Cecileen Green “An investigation into
the output tax consequences of bitcoin transactions
for a South African value-added tax vendor” (2019)
22(1) South African Journal of Economic and Man-
agement Sciences” 1.
192
South African Reserve Bank “Statement on crypto
assets” (media release, 16 January 2019).
193
IFWG Crypto Assets Regulatory Working Group, above
n 3, at 21.
194
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [5.3.1].
195
IFWG Crypto Assets Regulatory Working Group,
196
above n 3, at [5.3.2].
Id.
197
See Financial Action Task Force “Regulation of virtual
assets” (19 October 2018) <www.fatf-gafi.org/>.
198
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [5.3.2].
into this category because of their volatility
and lack of intrinsic value. Were the “bub-
ble to burst”, significant losses would be
incurred. The inclusion of cryptocurrencies
into this category means that those tax
losses would be denied and ring-fenced
to any future gains. The practical impli-
cation of this change is, however, unclear
as it only applies to individuals and cryp-
tocurrencies held as trading stock.
As noted above, possibly taking heed
of the debate as to the applicability of
VAT/GST to cryptocurrency transactions,
South Africa recently legislated to exempt
cryptocurrencies from VAT by adding
same to the definition of “financial serv-
ices”.188 Specifically, it provides that the
“issue, acquisition, collection, buying or
selling or transfer of ownership of any
cryptocurrency” is a “financial service”
for VAT purposes. 189 The consequence
is that these transactions are now exempt
from VAT. However, the explanatory
memorandum maintains that this was
simply to clarify the existing position.190
It is the authors’ view that this is not the
case. If cryptocurrencies are intangible
assets, VAT should be imposed on such
transactions, akin to barter transactions.
It is contended that, instead, it was a re-
sponse to the criticism of the double tax-
ation issue. 191 The government has
recharacterised cryptocurrencies in the
VAT context as a financial instrument,
specifically a financial service, rather than
maintaining its original position that it
is property for all regulatory purposes.
This is unfortunate as it undermines the
unitary policy embraced by the IFWG.
CRYPTOCURRENCY
Anti-Money Laundering and Counter-Ter-
rorism Financing Measures. As noted
above, at the beginning of 2018 a joint
working group was established under the
auspices of the IFWG to consider the pol-
icy and regulatory implications for the fi-
nancial sector and economy in the advent
of cryptocurrencies, particularly relating
to the trading of cryptocurrencies and
their use for payment. This working group
built on the early statements of concerns
regarding the risks involved with investing
in, and using, cryptocurrencies and pro-
duced a consultation paper on 16 January
2019.192 In its consultation paper it set out
the possible approaches to regulate cryp-
tocurrencies available to governments,
including a matrix for classifying ap-
proaches to regulating cryptocurrencies.193
It concluded that South Africa was in
the level 2 classification, as recommenda-
tions have been made by regulatory au-
thorities.194 It proposes a new regulatory
approach be adopted, between levels 3 and
4, namely, “limited regulation”.195 The pri-
mary concern was the need to “achieve anti-
money laundering/combating the financing
of terrorism (AML/CFT) requirements”.196
In turn, it proposed specific measures be
introduced to extend the Financial Action
Task Force (FATF) recommendations197
and to ensure cryptocurrencies fall within
the parameters of AML/CFT requirements.
The essence is that cryptocurrency service
providers will be made into accountable
institutions that have a legal obligation to
comply with AML/CFT requirements
under the Financial Intelligence Centre Act
38 of 2001 (South Africa).198 While, at this
l DECEMBER 2020 l JOURNAL OF INTERNATIONAL TAXATION 61
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 62

EXHIBIT 1
Matrix for Classifying Approaches to Regulating Crypto Assets

No. of Countries
Level Description of Level
at this Level

Level 0: Ignoring The government does not pay attention to the existence of crypto assets. 150 countries

An official body has released a statement recognising the existence of crypto assets,
Level 1: Monitoring 3 countries
but no approach to dealing with crypto assets has been defined.

Level 2: Recommendation An official body has released a statement proposing an approach to deal with crypto assets. 25 countries

Level 3: Guidance An official body has issued guidance to govern the use of crypto assets. 5 countries

Pre-defined conditions exist which, once complied with, could lead to formal
Level 4: Regulation 3 countries
authorisation to provide crypto assets-related products and services.

A complete or partial prohibition or adoption of crypto assets. A ban may be

Level 5: Ban or integration
implemented via different forms, including banning banks from supporting activities 11 countries
(definitive legislation)
related to crypto assets and a complete ban on all institutions and individuals.

stage, setting prescribed conditions for for-
mal authorisation is not proposed for the
immediate future, pivotal identification
and verification, monitoring and disclosure
obligations will apply to these cryptocur-
rency providers.199 Nevertheless, the con-
sultation paper suggests that an initial
registration process200 could lead to detailed
prerequisites for formal authorisation to
provide cryptocurrency products or services
(i.e., level 4).201 To date, these measures
have not been enacted.
In summary, South Africa has taken a
cautionary stance, which is intelligent and
understandable, given the risks facing na-
tions that engage with cryptocurrencies.
Through the IFWG it has developed a rel-
atively consistent approach to cryptocur-
rencies, which must provide a good
foundation for moving forward, whether
that be “limited regulation” or a specific
framework for registering cryptocurrency
providers, exchanges and/or holders.
Conclusion
Exhibit 2 summarizes the treatment of
cryptocurrencies in the subject jurisdic-
tions. The arrival of cryptocurrency and
the blockchain technology that underpins
it have forced regulators around the world
to rethink their regulatory approach. One
of the characteristics that has made cryp-
tocurrency attractive to the popular masses
— namely, that it is a means of exchange
conducted on peer-to-peer networks that
do not require governmental recognition
and sanction — have made it alien to ex-
62 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020
isting legal concepts. The novel charac-
teristics of cryptocurrency have caused
regulators to struggle in knowing how to
classify cryptocurrency under existing
taxation, financial services, anti-money
laundering and consumer protection laws.
The analysis in this article has demon-
strated that, although cryptocurrency is
currently banned in China, other coun-
tries, i.e., New Zealand, Australia and
South Africa, have recognised it without
accepting it as a legal tender. In these coun-
tries, some changes to existing laws have
been made to accommodate cryptocur-
rency within the existing legal framework.
Although the changes made to the laws
have been successful in averting certain
problems, such as double taxation, the
continuing treatment of cryptocurrency
based on existing legal concepts has cre-
ated new regulatory challenges for these
regulatory authorities.
The above analysis provides a number
of lessons for countries that may, at this
point in the above matrix, be level 0 or 1,
or even those in higher levels that may re-
flect on the appropriateness of their current
policies.202 As stated above, whether to ban
cryptocurrencies (whether that be ICOs,
trading or use as a means of payment) is a
matter for each nation. There is no right
or wrong answer. However, it is contended
that South Africa’s cautious position,
whereby the allowance of such cryptocur-
rency activities might be reversed in the
future if any of the perceived risks become
real, is an intelligent approach. The reality
of cryptocurrencies being used for illegal
l CRYPTOCURRENCY
purposes, such as money laundering, the
dark web and financing terrorism, is a con-
cern held by many nations. Equally, South
Africa is not the only nation to be con-
cerned about cryptocurrencies potentially
destabilising the domestic currency.203
This was also one of the concerns
raised by the United States Government
when Facebook announced, on 18 June
2019, the launch of its proposed Libra
cryptocurrency. Mark Zuckerberg gave
evidence before the United States Senate
hearing that the intent was not to compete
with other cryptocurrencies, but to com-
pete with “traditional” currencies issued
by central banks. 204 President Donald
Trump tweeted in reply that “If Facebook
and other companies want to become a
bank, they must seek a new Banking Char-
ter and become subject to all Banking Reg-
ulations”.205 This concern for destabilising
domestic currency, in addition to privacy
issues, was a key reason why it was not
approved, investors pulled out of the
scheme and it did not eventuate.206
Another positive take out of the South
African policy stance is the co-ordinated
approach of all relevant regulatory au-
thorities. The IFWG has been pivotal in
ensuring NT, SARB, FSCA and FIC all
adopt a conciliatory approach to the char-
acterisation and regulation of cryptocur-
rencies. Other jurisdictions, including
New Zealand and Australia, have left these
important issues to be determined by each
authority, whether that be, inter alia, rev-
enue (Inland Revenue or the ATO), se-
curities (FMA or ASIC), consumer affairs
JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 63

EXHIBIT 2
Treatment of Cryptocurrencies

Australia China New Zealand South Africa

ICO Legal Ban Legal Legal

Legal, but cryptocurrency Financial institutions are Legal, but cryptocurrency Legal, but cryptocurrency
Legal
is neither currency prohibited from holding is neither currency is neither currency
status
nor legal tender. and trading Bitcoin. nor legal tender. nor legal tender.

The transfer of cryptocurrency
will be subject to the following
CGT classifications: personal
asset – when it is used to
acquire personal asset; and
profit-making investment –
miners with intention of profit-
making. Alternatively, miners
Tax may be taxed as ordinary
treatment income under s 6-5 of the ITAA
1997 (Cth) with reduction in gain
of CGT event A1 under s 118-20.
Regarding GST, supply of digital
currencies is generally treated
as supplies of money and
therefore exempt. However, the
situation is uncertain for ICOs.
Before the ban, it was
treated as a commodity.
The gain from the
transfer could be taxed
under individual income
tax, while the exchange
could constitute a VAT
supply.
It is considered as an asset of an
intangible nature. Trading of
Cryptocurrency is treated as a
cryptocurrency on revenue will
commodity. As New Zealand
be subject to income tax. It can
does not have a
be regarded as trading stock in
comprehensive CGT,
the context of mining
potentially the exchange of
businesses. Gain from the
cryptocurrency can be subject
disposal of capital investment of
to income tax under the
cryptocurrency will be taxed
following: business of trading
under CGT. After the 2019
in cryptocurrencies, s CB 1 of
amendment to Income Tax Act
the ITA 2007; sale of personal
1962 (South Africa),
property for resale, s CB 4 of
cryptocurrency is treated as a
the ITA 2007; or profit-making
financial instrument (not
scheme, s CB 3 of the ITA
personal use asset) for CGT
2007.
purposes.
The transfer of cryptocurrency
In regard to VAT, cryptocurrency
is also subject to GST.
is treated like a financial service
and is exempt.

(MBIE or the ACC) or banking (Reserve
Bank of New Zealand or Reserve Bank of
Australia). The uncoordinated approach
adopted by each regulatory authority at
both state and federal levels has proven
problematic in the United States. Com-
mentators have observed that different
regulatory authorities (such as revenue,
consumer protection, trade competition
law and AMF/CTF authorities) have wres-
tled to take regulatory control over cryp-
tocurrencies.207 The consequent overlap
and inconsistent approaches have pro-
duced a regulatory nightmare.208
New Zealand’s strong stance to adopt
a single characterisation of cryptocurren-
199
Id.
200
IFWG Crypto Assets Regulatory Working Group,
201
above n 3, at [8.4].
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [8.4] and [8.7].
202
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [5.2].
203
IFWG Crypto Assets Regulatory Working Group,
above n 3, at [4.1.1].
204
See further “Transcript of Mark Zuckerberg’s Senate
hearing” The Washington Post (online ed, 11 April
2018).
205
Hannah Murphy “Donald Trump hits out at Face-
book’s Libra and bitcoin” Financial Times (online ed,
San Francisco, 12 July 2019).
206
See footnote 35 for discussion.
cies as property (i.e., a commodity) is, in
the authors’ opinion, the preferable ap-
proach. It is contended that it is preferable
to that taken in some countries, such as
Australia and South Africa. Australian
regulators have struggled to adopt a con-
sistent characterisation of cryptocurrencies
under taxation and corporation laws, lead-
ing to negative policy-related conse-
quences. As discussed above,
cryptocurrencies are treated as property
for income tax and CGT purposes. How-
ever, for GST purposes it has defined cryp-
tocurrencies in terms of a form of “digital
currency”.209 It appears Australia is chas-
ing the Fintech dollar at the expense of a
207
See Alessandre Alonso “The Regulation of Cryptocur-
rencies and Money Laundering” (unpublished manu-
208
script).
Alonso, above n 208.
209
New definition of “digital currency” in s 195-1 of the
A New Tax System (Goods and Services Tax) Act 1999
(Cth), introduced by the Treasury Laws Amendment
(2017 Measures No 6) Act 2017 (Cth).
210
Australian Taxation Office, above n 110.
211
See National Treasury, above n 170.
212
In Australia, see ss 6-5(2), 6-5(3), 6-10(4), 6-10(5) and
relevant definitions in s 995-1 the Income Tax Assess-
ment Act 1997 (Cth). In New Zealand, see in particular
s BD 1 of the Income Tax Act 2007. Equally, in South
Africa see, inter alia, s 1 of the Income Tax Act 58 of
1962 (South Africa), definition of “gross income”.
CRYPTOCURRENCY
coherent regulatory foundation. The au-
thors see a parallel here with what is
known as the “race to the bottom”, where
countries compete to provide the lowest
corporate tax rates to attract investment.
The backflip on the characterising of
cryptocurrencies for GST purposes is
questionable in light of the fact that in all
three jurisdictions cryptocurrencies are
not widely accepted. This was actually
one of the reasons the ATO was able to
comfortably conclude that it was neither
a currency nor legal tender.210 It seems a
rather rash decision, without standing
back and balancing the risks (particularly
the economic risks) which are involved.
The approach in Australia creates confu-
sion over the tax consequences for tax-
payers of entering into cryptocurrency
transactions. It also results in inconsistent
legal tenets, which have the potential to
undermine the legitimacy of the law. South
Africa may be criticised equally for these
reasons; however, it is difficult to pinpoint
the true reason for its backflip on the ap-
plication of VAT as the explanatory mem-
orandum maintains that this was simply
to clarify the existing position.211 The co-
herent approach in New Zealand is to be
preferred.
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JOIT-20-12-07-Cassidy.qxp 11/19/20 1:48 PM Page 64
These matters may be characterised
in the macro category identified above.
However, there are still many micro is-
sues, particularly in the taxation context,
that will need to be addressed. One issue
relates to the valuation of the sales and
cost base from exchanges of cryptocur-
rencies. As the price of cryptocurrency
is fluctuating, there is a lack of an objec-
tive valuation method and trading plat-
forms to determine the value of the
cryptocurrency. A related issue is to de-
cide the types of expenditure eligible for
tax deduction. For example, should the
electricity expenses related to the mining
of cryptocurrency be deductible? Should
the cost/loss be tax deductible when tax-
payers lose access to their crypto wallets
or when their cryptocurrency is embez-
zled by hackers?
One common regulatory challenge
facing global revenue authorities is rules
relating to residence and source of cryp-
tocurrency transactions. The taxation
regimes in all three jurisdictions analysed
above are founded on the fundamental
notions of source and residence.212 These
jurisdictions are yet to tackle the numerous
issues pertaining to such in the context
64 l
JOURNAL OF INTERNATIONAL TAXATION DECEMBER 2020
of cryptocurrencies. For centuries, resi-
dence and source principles have been
constructed based on the assumption that
transactions could be traced to a geo-
graphical border. These principles have
been developed to achieve the twin ob-
jectives of ensuring the taxing rights of
nations are fairly allocated and that double
taxation is avoided for the taxpaying en-
tities. Due to the different locations of
traders, exchange providers and verifica-
tion of transactions conducted on peer-
to-peer networks with cryptocurrency,
however, it is unclear how issues of tax
residency and sources will be determined
without placing the taxing government
in a revenue-disadvantageous position,
while still protecting taxpayers from dou-
ble taxation. Equally challenging in the
application of an income tax system to
trades in cryptocurrencies is the difficulty
in determining the source of the income.
Should the tax be imposed by the source
country of the enterprise/exchange or the
tax resident trader? In an era of digital
economy, electronic transactions are often
characterised by a lack of physical nature.
In particular, it is difficult to apply the
traditional concept of tax residency in the
l CRYPTOCURRENCY
context of cryptocurrency trading. This
impacts not only on issues of source and
residence but also complicates the tax col-
lection process.
Future research should focus on the
tax system of other developed countries
such as the United States, the United
Kingdom and developing countries such
as India in order to gain a broader un-
derstanding of the taxation of cryptocur-
rency. In addition to residence and
source issues, another possible research
area is to investigate the administration
aspects of GST (i.e., GST supplies, ex-
empt supplies, timing, valuation, and
GST input in relation to the exchange
of cryptocurrency). Similarly, future re-
search is needed to explore the admin-
istrative issues of CGT (i.e., CGT assets,
timing of recognition and disposal, and
allowable deductions on cryptocurrency
transactions). This will be particularly
important for Australia and South Africa
where cryptocurrency can be treated dif-
ferently under GST and CGT/income
tax. Beyond the above discussions, in-
ternational efforts to harmonise national
laws should be a focal point of research
in future years. ●
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