Syed Rahman and Ulrich Schmidt consider an Australian court ruling that is at odds with the UK’s current classification of crypto
An Australian court has ruled that Bitcoin should be classified as property. However, it did state that Bitcoin is more akin to the Australian dollar than a speculative asset.
Magistrate Michael O’Connell said that Bitcoin should be regarded as money, as crypto trading was more like conducting transactions in Australian dollars than owning and investing in speculative assets such as shares, gold or foreign currency.
The case, which relates to a police officer accused of stealing Bitcoin, has implications under the Australian tax system; under which crypto has – until now – been classed as property. As a result of the ruling, Bitcoin could be placed outside the Australian capital gains tax regime – which could open the floodgates to an estimated USD 640 million in tax refund applications.
Contradicts
The ruling is notable because it, to a degree, contradicts the UK’s legal view of crypto.
The UK view arose from the 2019 landmark cryptocurrency case of AA v Persons Unknown. In it, the High Court stated - for the first time since the UK Jurisdiction Taskforce’s Legal Statement on Cryptoassets and Smart Contracts - that cryptocurrency could be considered property. This was confirmed two years later, in DPP V Briedis and Reskajs, in which the court found that cryptocurrencies fell within the definition of “property” in section 316(4) of the Proceeds of Crime Act 2002. This view will become law in the UK if the Property (Digital Assets etc) Bill is passed.
In contrast to the Australian ruling, the UK authorities do not view cryptocurrencies as akin to the pound, but rather as assets similar to shares or personal possessions that can be subject to capital gains tax.
If this recent Australian ruling is upheld on appeal, it will clearly differ from the UK’s legal approach to cryptocurrency. It is interesting to note that the defence in this case had argued unsuccessfully that Bitcoin was information - not property – and so could not be stolen or taxed at all. There has been no established legal basis in Australia for treating Bitcoin as property, even though the Australian tax office has done so since 2014.
This decision, it should be emphasised, has no direct implications for the UK. But it does suggest a change in perspective on the international landscape, with cryptocurrencies becoming legitimate currencies and less likely to be viewed as a speculative investment vehicle that was more akin to gambling. As regulators aim to cement the UK’s leading position in the crypto world, this viewpoint may push them to legitimise cryptocurrencies further and, as with the Australian ruling, treat them as being similar to the pound.
Cryptocurrency investors will want to pay close attention to any possible developments in the UK that are similar to the Australian ruling, as they could affect the taxable status of cryptocurrencies.
