Wikipedia defines a cryptocurrency (also known as crypto-currency, or crypto) as a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.
Bitcoin was created in 2009 by Satoshi Nakamoto as the world’s first cryptocurrency and is the biggest. People and businesses produce Bitcoins running computers all around the world, using software that solves mathematical problems. This process is known as Bitcoin mining.
As of August 2022, cryptocurrencies had the following statistics:
- There are over 20,000 different cryptocurrencies.
- 4.6 million Australians own cryptocurrencies.
- The total market cap of all cryptocurrencies is $1 trillion.
- Over $100 billion of cryptocurrencies trade every day.
- Bitcoin has the highest current market cap at over $420 billion – more than double its closest rival Ethereum.
- Four of the top 20 cryptocurrencies are directly pegged to USD value – Tether, USD Coin, Binance USD.
- 21% of the US population has traded or used cryptocurrency.
- As a continent, Asia has over 4 times more cryptocurrency users than any other continent.
The tax consequences of using Bitcoin are as follows:
- Trading Bitcoin for a profit-making purpose will result in any profits being assessable income.
- Bitcoin is an asset for capital gains tax (CGT) purposes. Bitcoin held for 12 months may access the 50% CGT discount.
- Transacting with Bitcoins is akin to a barter arrangement, with similar tax consequences. When receiving Bitcoin for the sale of goods or services, a business may be charged GST on that Bitcoin.
The buying, selling or using of Bitcoin as payment is not subject to GST (if not carrying on a business).
