Cryptocurrency Law

Complying with proper regulations is critical for advising on cryptocurrency, exchanges and fund structures. Chamberlains experienced Cryptocurrency Team work with private clients, institutional investors, SMSF's and corporations to provide advice on a range of areas.

We picked the most highly specialised and talented lawyers.

Cryptocurrency has seen increasingly unpredictable and strong growth since 2016, turning previously unsophisticated investors into millionaires and sometimes billionaires.

With many new businesses and investors, there is a web of legal issues involved with trading in cryptocurrency. Whatever business action you want to take, Chamberlains’ experienced lawyers can advise you on the safest and most commercially-viable path.

Process - what happens next?

Initial case evaluation

After an initial briefing of your matter, we will provide you with a preliminary quote.

Consultation

We look into all aspects of your matter and suggest the most viable path for you.

Case management

The Chamberlains team will work tirelessly to reach the best possible outcome for you.

Services

Taxation & Superannuation

Tax is a major factor for cryptocurrency investors, traders, miners and many businesses.  The current tax system is not built to handle cryptocurrency well which causes headaches for all.

As an asset with often dramatic price fluctuations, capital gains tax can apply when you sell, trade and convert it, or when it is used to obtain goods or services. Similarly, if you are ‘carrying on a business’ that involves transacting with cryptocurrency, trading stock rules can apply. Crypto holders, traders and transactors need to stay on top of their tax obligations and business structure, or risk large and complicated tax bills.

Self managed superfunds (SMSF’s) trustees and members need to be aware of their tax requirements when engaging in transactions involving cryptocurrency. Each SMSF is unique, and the consequences of holding crypto in an SMSF portfolio will change depending on the funds circumstances. SMSF’s also have regulatory considerations and requirements and must exercise caution when investing in cryptocurrency.

Regulatory Status

Complying with proper regulations is critical for advising on cryptocurrency, exchanges and fund structures.

Cryptocurrency is classed as a financial product under the Corporations Act 2001 (Cth) and falls within the scope of Australia’s financial services regulatory regime and the jurisdiction of ASIC. There is no dedicated legislation dealing specifically with cryptocurrency, however ASIC has released whitepapers to provide regulatory guidance.

Regulatory status within Australia and globally is generally unclear, and it is important that you seek the right advice to ensure you comply.

Litigation & Disputes

Decentralised blockchain technology and the commerciality of the market has naturally given rise to crypto disputes. Whether it be transactions, ownership, intellectual property or regulation, the risks for the unaware investor remain very high.

There have been a number of significant collapses in crypto-exchanges and the potential for cross-border insolvency in a volatile market.

Compliance with Anti-Money Laundering Laws & AUSTRAC

Digital currency exchange providers must be registered with AUSTRAC before they can provide exchange services. Chamberlains can assist your exchange with registration, refused or suspended registrations, 3 year renewals of registration and keeping your records up to date.

Failure to comply with obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 may render you liable to civil penalty orders, enforceable undertakings, infringement notices and remedial directions.

Exchanges and wallets

Digital exchanges and wallets allow the buying and selling of cryptocurrency and a method of storing your assets. Where a platform deals with crypto assets, the platform is operating a market and a range of Australian laws can apply. Wallets that store assets, or tokens, are financial products and you must ensure you hold the appropriate custodial and depository authorisations.

Chamberlains not only advises on a wide range of crypto and stable coins, but also accepts payments in cryptocurrency.

Innovators, investors, promoters & asset managers

Chamberlains works with private clients, institutional investors, SMSF’s and corporations. If you are providing advice or intermediary services for crypto-assets, you are required to hold an AFS license and will be subject to stringent regulations. Chamberlains can assist you navigating these regulations

Cryptocurrency estate planning

Planning your estate is not often the first priority, though with crypto-assets it is important that these assets are documented and protected. This is especially so for documenting access to your crypto assets including your recovery phrase.

Chamberlains can assist with documenting and protecting this critical information to ensure your crypto assets are safe.

FAQs

  • What is a Crypto Airdrop?

    For new cryptocurrency, it can be difficult to convince consumers to use or purchase a coin in its early stages. With no publicity, followers, or trading volume, new projects need to find innovative ways to market the currency in order to reach the consumers. Airdrops is one common tool to do this.

    One way to promote coins and increase uptake is through airdrops, where a consumer receives free coins or tokens ‘airdropped’ into their crypto wallet. Blockchain based projects like to use airdropping as a marketing tool to promote awareness and engage consumers, helping build the early value in their token and increasing the overall supply.

    An airdrop involves sending a small amount of a new coin to targeted members of a selected blockchain platform. To qualify, the wallet holder may need to hold a minimum amount of a certain coin and they may even be given multiple Airdrops if their wallet remains above a minimum balance for a sustained period. Some Airdrops may require the receiver to perform a task, such as a social media post, to qualify for the crypto drop.

    Airdrops have the potential to provide real value to a consumer. In 2020, Uniswap released a native coin, UNI, by dropping it into the accounts of all users on its platform that had made at least 1 trade prior to a certain date. The coin initially traded for between $2-$4 USD before rising to $30USD in April 2020, netting those who had received the airdropped tokens $12,000 USD.


  • Capital Gains Tax (CGT) Issues with Cryptocurrency

    There are a number of ways to reduce your CGT. Offsetting capital gains with capital losses, obtaining the CGT discount by holding the crypto for more than 12 months and consider holding cryptocurrency in a company or discretionary trust can help to reduce your CGT cost. The 12-month rule is useful for all longer-term investors, as it gives asset holders a 50% discount on capital gains when they dispose of an asset, provided they have held the asset for at least 12 months.

    Some investors will benefit from using structures for both long and short-term investing in cryptocurrency. There are particular legal issues with trusts and companies controlling wallets and a lawyer familiar with cryptocurrency issues is needed. The ATO has cryptocurrency in their sights this year, and in particular, the ATO announced a data matching program for cryptocurrency exchanges.  Australian crypto exchanges will be required to provide data to the ATO to assist the ATO to identify taxpayers who may be underreporting or not reporting their cryptocurrency gains properly.


  • P2E Games, Trading, & NFT’s - How do I structure my tax for a Crypto Business?

    There are a variety of businesses that are operating using cryptocurrency and NFT’s. Many entrepreneurs are pushing new ways to generate income from this unique area, such as play-to-earn gaming (P2E) businesses, bot trading strategies, launching non-fungible token (NFT) collections and infinite other possibilities.

    Currently, many people are making significant money operating P2E guilds for Axie Infinity and other blockchain games – it is essential for these businesses to be structured just like any business for tax efficiency and asset protection.

    These businesses do not fit neatly within the Australian tax system. Special care is needed to structure them to be tax-efficient and not get a nasty surprise with the impending ATO crackdown on cryptocurrency.


Contact us.

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