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The UK and Australia move forward in their efforts to regulate cryptocurrencies

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(Kitco News) - Lawmakers in the UK voted to advance a crypto-related amendment to the Financial Services and Markets (FSM) Bill on Oct. 25, helping to finalize the framework of the country’s approach to managing Bitcoin and other “digital settlement assets” moving forward.  

Parliament member Andrew Griffith introduced the amendment last week, signaling that the bill would bring crypto under its scope. He proposed that a cryptoasset be defined as “any cryptographically secured digital representation of value or contractual rights” that can be transferred, stored or traded electronically and uses blockchain technology.

“This new clause amends the Financial Services and Markets Act 2000 to clarify that the powers relating to financial promotion and regulated activities can be relied on to regulate cryptoassets and activities relating to cryptoassets. Cryptoasset is also defined, with a power to amend the definition,” Griffith wrote in the amendment paper.

Members of the House of Commons, the UK Parliament’s lower house, met on Tuesday for a reading of the bill and ultimately approved it for advancement to a third reading. After that, it will be sent to the Upper House of Parliament for approval. 

The bill's summary indicates that it looks to introduce “a range of measures [...] seeking to maintain and enhance the UK’s position as a global leader in financial services, ensuring the sector continues to deliver for individuals and businesses across the country.”

Said differently, the goal of the bill is to remodel the country’s regulatory framework and establish a range of measures to enable the UK to compete in the financial services sector on the global stage.  

Language in the bill spells out how the country intends to regulate stablecoins as a form of payment and introduces the new term “Digital Settlement Assets” (DSA) as an alternative to using “crypto assets.” 

“Crypto assets use some form of distributed ledger technology (DLT),” whereas DSA includes stablecoins, “given their potential to develop into a widespread means of payment,” the UK government said. 

In order for the bill to become law, it first needs to be approved or amended by the House of Lords before advancing to final royal approval by King Charles III.

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Australia confirms crypto will be subject to capital gains taxes

Down in Australia, recently released budget papers for 2022-23 have confirmed that “digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency.”

As such, digital currencies will continue to maintain their current tax treatment, “including the capital gains tax treatment where they are held as an investment,” the budget proposal said. “This measure removes uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as legal tender and will be backdated to income years that include 1 July 2021.”

Any digital currency or central bank digital currencies (CBDCs) issued by a government will be taxed as foreign currency. 

“The exclusion does not apply to digital currencies issued by, or under the authority of, a government agency, which continue to be taxed as foreign currency,” the report added. 

Based on the government's tax measures, investors will be required to pay capital gains tax (CGT) on profits they make from selling or trading crypto through a centralized exchange. 

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