Bitcoin not a financial product… yet

The federal government should hold off on classifying crypto currencies such as Bitcoin as financial products, a parliamentary committee has recommended.

The Senate committee established last October had been asked to consider a range of taxation and regulatory issues raised by the emergence of digital currencies.

While the committee recommended that digital currencies be treated as money for GST purposes, it warned the government to take a “wait-and-see” approach before regulating digital currencies like conventional financial products and payment services.

In its report tabled in parliament today the committee wrote that such regulation would be premature and could stymie the digital currency industry’s development in Australia.

Instead, it recommended that the government consider establishing a taskforce to further investigate the opportunities and risks involved with digital currencies and support a self-regulatory model in the meantime.

If accepted by the government, the recommendations mean that Bitcoin is unlikely to be subject to regulatory requirements of the Corporations Act.

In its report the committee referred to evidence by Australian Securities and Investment Commission (ASIC) senior executive Michael Sadaat who warned of the difficulties of regulating crypto currencies.

“I think the difficulty in regulating the trading platforms like traditional markets is that the compliance obligations that are associated with running a traditional financial market are quite high. The bar is set quite high. I think it is likely that if you were simply to apply the existing framework to platforms that sell digital currency, most would find it uneconomic to sustain in Australia. And because the market for these bitcoins is global, a lot of that activity would move offshore and Australian consumers would probably still end up being able to speculate with digital currency by buying and selling on foreign trading platforms,” Mr Sadaat told the committee.

The committee also referred to evidence vocal Bitcoin expert and author Andreas

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