Bitcoin is an asset, not a foreign currency

Bitcoin had a bit of play in the Aussie news this week when the Australian Taxation Office (ATO) decided that it would be considered an ‘intangible asset’ instead of foreign currency for taxation purposes, so subject to capital gains and the Goods and Service Tax (GST), not surprising since it follows similar decisions by the USA and Singapore (but different to the UK which treats Bitcoin as currency). What does this mean? For individuals buying Bitcoins or products with Bitcoins for personal purposes (less than ten thousand dollars and not to make a profit), not a lot. But the 10% Goods and Services Tax would affect exchanges, mining Bitcoins for profit and business purposes, and make tax time a lot more complicated for businesses that accept Bitcoin payments (who might have to pay GST twice).

This has led to a whole lot of collective groaning by Bitcoin enthusiasts (Bitcointhusiasts?) who are concerned that an overcomplicated and expensive tax regime will push new Bitcoin businesses off-shore (though why they think the ATO would give a shit about that I cannot fathom), while others think that any ruling at all will give legitimacy to a product (tool/asset/I-don’t-like-calling-it-a-currency-myself) that suffers some serious image problems. Y’know, because it’s a largely unregulated and incredibly volatile speculative product synonymous with buying drugs on the internet. Those image problems.

Sorry. Bitcoin’s one of those areas where I find it harder to bite back the bias. Because I’m cynical (and not the only one).

Honestly though the decision to treat Bitcoin as an asset rather than a foreign currency isn’t much of a surprise, and the ATO are accepting public comment on the policies (that might not noticeably change anything, but they aren’t completely deaf). While a lot of people are obviously unhappy that government regulators (not just Australian) are starting to look at how to restrict, regulate and worst of all tax Bitcoins and other cryptocurrencies, it’s gonna keep happening and it’s got to keep happening before they can achieve any mainstream success.

After all given the volatility in the value of Bitcoin’s price, because of lack of accountability and regulation or because of heavy-handed and reactive government regulation (due to perfectly reasonable fears of a speculative bubble), why would major corporations like Google or Amazon start accepting it as a method of payment? Even imperfect regulations and taxation by enough nations, provided they’re relatively measured (so not what China did) and coherent, will go a long way towards stabilising the price and people will feel better about using Bitcoins if they don’t have to worry that the real world value of their funds will suddenly drop.