The Australian Government’s Crackdown on Digital Assets Will Make Crypto Become More Mainstream
A former US Internal Revenue Service special counsel has warned that owners of cryptocurrency should treat their digital assets like other investments and play by the rules when it comes to reporting income.
Roger Brown, who currently works as the global head of tax strategy at Chainalysis, believes that moves made by governments across the world to tighten compliance for digital asset holders were a direct result of their poor record in the past.
“I think it’s a reaction that we’ve seen globally, I know speaking to a few dozen tax authorities there’s a belief that there is an underpayment of tax from crypto assets. Statistics that we know, or we have seen, in the US — and there is no reason to believe Australia is any different — in 2015 when bitcoin was the main asset 900 taxpayers reported their crypto. In that same year Coinbase (an American crypto exchange) alone reported over 2 million customers,” says Roger Brown the global head of tax strategy at Chainalysis.
Chainalysis strategy chief believes that the government’s crackdown on digital assets would eventually make them more mainstream.
Roger Brown said these numbers continued to fuel government concerns that digital asset investors were inaccurately reporting income.
“Many governments believe that this kind of statistic still persists and as a result of that there’s a need to take more affirmative action to determine who has crypto assets,” says Roger Brown.
In Australia, the Australian Tax Office (ATO) believes that over 600,000 taxpayers had invested in crypto in recent years, spurring the government to say it would implement token mapping, which is a way of defining different types of digital assets to group them correctly and determine what regulatory gaps there are.
“Understanding that, the Australian government is able to ascertain who in Australia is trading crypto,” Mr Brown said. “But that effort alone is not going to be a panacea. Why? Because the vast majority of transfers from Australian exchanges are to non-Australians or private wallets. That’s why I think token mapping is something that most governments are looking to do, and you see that at the multilateral level with the OECD’s crypto asset reporting framework, says Roger Brown.
As government around the world begin to tighten the regulation of decentralised investments some crypto advocates are concerned, they will lose their appeal of being beyond regulation, however Mr. Brown says that regulation would only strengthen digital assets.
“When you look to action taken by governments on taxing crypto — examples include summons the IRS has publicly issued to US exchanges to say, ‘Tell me who is American trading on your exchange’, and the 350,000 letters the ATO sent out around crypto trading — the US and other governments are increasingly putting out guidance on how crypto is going to be taxed. All of these things have not dampened the rise, putting aside crypto winter, you had a climb up to the end of 2021, 45,000ish was the price bitcoin closed at the end of 2021,” says Roger Brown.
Roger Brown says that he believed an increase in responsible regulation would assist crypto valuations.
“We’re seeing that people are focusing on the promise of crypto and sensible regulation is not driving down the pricing of it. I think governments in effect will attract institutional money and institutional money is risk averse, and with the risk aversion crypto again I think will pump with regards to its pre-2022 highs,” says Roger Brown.
“I think those that play in this space should believe in protective safeguards because who wants to deal with rug-pulls, who wants to be fearful of getting exposure to an economic asset and then someone running off with their money? It’s a new system and it has had growing pains, but I think the growing pains like all adolescents will go away and it will be a mature asset class with the recognition of the full economic promise,” continues Roger Brown.
However, Mr Brown has also said that governments needed to change little when it came to basic rules around buying and selling.
