How to Buy Cryptocurrency in Australia? 2022
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Thanks to the ever-expanding digital asset market, crypto investors have access to a plethora of digital currencies, crypto exchanges, and innovative financial instruments to trade virtual money for a profitable outcome.
However, many financial regulations either impede or facilitate the incorporation of digital money into our daily lives. As a result, we’ll start this guide with the legislation that governs cryptocurrency mining and trading in Australia and then delve into everything else you should think about before making your first Bitcoin investment.
Is Cryptocurrency Legal in Australia?
The Australian government and law define cryptocurrencies as ‘digital assets in which cryptographic algorithms are employed to govern the creation of new units and to authenticate the blockchain transactions’. The Australian government also recognises that virtual currencies typically function independently from a central monetary authority or government.
As of 2017, trading cryptocurrencies, digital currencies, and blockchain-based crypto trading platforms is legal in Australia, making all crypto mining and trading operations liable to the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Act 2006 and its ensuing regulatory guidelines.
Crypto Tax Regulation
In Australia, Bitcoin and all other altcoins are recognised as legal properties liable to the Capital Gains Tax (CGT). That means you have to keep track of all your crypto transactions to be able to file your taxes correctly.
If you conduct crypto trading through a foreign (non-Australian) crypto trading platform, you may be subject to taxation in a different jurisdiction.
Cryptocurrency Trading Regulations
Regulatory changes on cryptocurrencies are moving forwards at a rapid pace, closely mirroring the rapid expansion of the digital money sector and blockchain technology services. In Australia, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has called for more stringent regulation of the digital assets market. According to the new crypto trading regulations that came into effect in 2018, any cryptocurrency exchange or trading platform that provides financial services in Australia must be registered with AUSTRAC.
For the crypto exchange platforms, this entails strict adherence to anti-money laundering and counter-terrorist financing procedures, authentication and verification of exchange users in compliance with KYC (Know Your Customer) rules, close monitoring of all blockchain transactions, and other measures.
If a provider of financial services and instruments for trading digital assets fails to register with AUSTRAC, the legislation threatens two years in prison or a 105,000 AUD fine.
The Australian Securities and Investments Commission (ASIC) published amended operational requirements for initial coin offerings (ICOs) and crypto trading in May 2019. Australian officials compelled a vast number of crypto exchanges to stop selling privacy coins (like Monero, Verge, DASH, or ZCash) in August 2020, citing financial safety concerns.
To sum up, companies dealing with crypto on Australian territory must comply with all Australian laws. That involves complying with applicable legislation, such as the Corporations Act, ASIC Act, and Australian Consumer Law, as well as strictly adhering to the AML and KYC protocols.
Ways to Buy Bitcoin (BTC) in Australia
The simplest way to buy Bitcoin and other cryptocurrencies is using a reputable cryptocurrency exchange. Exchanges are classified into two broad categories: centralised cryptocurrency exchanges (CEXs) and decentralised cryptocurrency exchanges (DEXs). Let’s examine the primary distinctions between these trading platforms.
Centralised vs Decentralised Cryptocurrency Exchanges
Nowadays, centralised platforms handle around 99% of all crypto transactions. Centralised exchanges (CEXs) can handle a significant amount of trades at the same time and execute multiple transactions in a matter of seconds. In this regard, we should mention that all Australian CEXs are regulated by AUSTRAC.
Most centralised exchanges are custodial platforms that store your private keys for you. As there is only one central location that is accountable for all of the platforms’ systems, centralized exchanges are inviting targets for cyber-criminals. These platforms often employ numerous security measures to protect user funds, such as two-factor authentication (2FA), SSL encryption, Distributed Denial of Service (DDoS) protocol, etc.
In comparison, decentralised exchanges do not require the use of an intermediary to complete transactions. They are also not usually fully regulated, and most of them don’t require user verification. Given that DEXs usually lack the required certifications for providing financial services, these exchanges can’t accept fiat currency deposits. Some DEXs accept credit card/debit card payments thanks to their partnerships with third-party payment processor companies.
DEXs typically don’t store crypto assets on platform and don’t keep custody over your private keys. Since users have total control over their funds, hacking incidents or scams on DEXs are less common than on CEXs. However, DEXs often face liquidity issues, and it may take longer to find a good deal on these platforms.
Types of Cryptocurrencies
Cryptocurrencies are digital assets that are produced on distributed ledgers known as blockchains. Cryptocurrencies were created to remove banks and other financial bodies that govern and retain authority over people’s funds to decentralise financial power.
There was just one digital coin at the start of the crypto revolution: Bitcoin. Every day, the number of blockchain developers and crypto initiatives expands as a result of Bitcoin’s success and popularity. As a result, today’s crypto market overflows with various types of cryptocurrency.
Cryptocurrencies are generally classified into two broad types: coins (Bitcoin and the alternative coins, i.e. altcoins) and tokens. The coins have dedicated blockchains and networks that fulfil different services across the crypto-ecosystem.
Tokens, on the other hand, are created on existing blockchains. For example, ERC20 tokens are created on top of the Ethereum blockchain, and Ether is the native coin of the Ethereum network. Tokens are programmable digital assets that allow for the implementation of smart contracts; they can represent ownership of assets beyond the blockchain network.
How to Buy Cryptocurrency in Australia With AUD or Crypto
In order to start trading, you must open a trading account with the cryptocurrency exchange of your choice. The registration process may vary slightly from exchange to exchange, but there are some basic steps that apply to most platforms.
Since Australian crypto trading platforms must follow stringent AML/CFT and KYC protocols, you may be asked to provide a valid email, user name, and password to begin with. Then, you’ll be asked to provide a government-issued ID, a recent photo of yourself, and a document confirming your country and address of residence. To be on the safe side, check the verification standards on the exchange where you intend to trade cryptos, as not all exchanges have the same identity verification criteria.
Depending on the security mechanisms applied by the platform, this might be enough to gain immediate access to the platform’s features, or you may have to wait for a team of dedicated professionals to examine your data before being granted access to the platform.
Once you’ve completed the identification verification procedure, you’ll need to make a deposit to start trading. You can make a fiat or cryptocurrency deposit, depending on the payment methods provided by the exchange. Once your funds arrive at your exchange account, you are ready to embark on a crypto trading adventure.
How to Safely Store Your Cryptocurrencies
The security of the assets is the number one priority of all traders. Having a digital wallet is essential for managing your digital currencies and keeping them protected. A cryptocurrency wallet holds your public and private keys, allows you to transfer and accept cryptocurrencies, and keeps track of your balance.
While many exchanges provide digital wallets, you can select a wallet that meets your own preferences and security criteria.
Digital wallets are often divided into cold (offline) wallets and hot (online) wallets. Let’s take a look at the advantages and disadvantages of both of these storage options.
Hot wallets include web-based storage solutions, mobile storage apps, and desktop wallets. Among them, web wallets are the most susceptible to hacking and cyberattacks because they are directly connected to the Internet, although the same could be said for all hot digital wallets.
On the other hand, hot wallets are simple to use, making them popular among crypto traders. Furthermore, many digital asset traders believe that mobile hot wallets are more convenient for trading cryptocurrencies than cold wallets because using a cold wallet would typically require logging off the trading platform, plugging your cold wallet into a PC or smart device, moving the coins to an online (hot) wallet, and then completing the trade.
While hot wallets may be less secure than cold wallets, they are an unquestionably more convenient way to store your cryptos.
A cold wallet (a hardware wallet or a paper wallet) is a physical device that keeps your Bitcoin stored offline. A USB stick-sized device is the most common form of hardware (cold) wallet. Cold storage wallets are generally considered to be a safer solution than hot wallets because they are not connected to the Internet. Thus, hardware wallets are impervious to cyberattacks for obvious reasons.
When attempting to steal your funds from a cold wallet, the fraudster would need to have actual possession of your cold storage or access to the cold wallet by knowing the password and PIN codes that unlock it, which is a rather difficult task. This can happen only if you misplace your hardware wallet or if it gets stolen. Still, even then, you can retrieve your coins using your passphrase.
The Most Popular Australian Exchanges
With the increase in popularity of cryptocurrencies, the market is swamped with crypto exchanges vying to provide the best trading environment to new crypto investors.
We’ve decided to feature four of the most prominent Australian exchanges in our crypto guide. Here’s a quick rundown of what CoinSpot, Swyftx, CoinJar, Digital Surge and Binance can offer to traders.
CoinSpot is one of the most well-known Bitcoin and cryptocurrency exchanges for Aussies. You can exchange more than 350 cryptocurrencies for Australian Dollars (AUD) simply and straightforwardly on this regulated and safe trading platform.
Once you enter the AUD amount you wish to spend into the exchange’s Instant Buy widget, you can complete a purchase with a single click on the “Buy” button. CoinSpot offers several payment methods for AUD deposits via third-party payment operators, including PayID, POLi, OSKO, and BPAY, or the more traditional bank account/bank transfers.
Swyftx is a low fee cryptocurrency trading platform that is authorised by the Australian Securities and Investments Commission (AUSTRAC). The platform is well-known for its simple sign-up procedure, automated trading options, as well as advanced trading tools.
In addition to offering a smart system for trading with access to some of the most liquid markets, Swyftx also offers sophisticated trading instruments for over 290 digital assets (including Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Ripple (XRP), etc.) and affordable trading fees.
CoinJar is a crypto trading exchange situated in Melbourne, Australia, that is both safe and regulated. The exchange allows for quick and inexpensive deposits in Australian Dollars, as well as the purchase of more than 40 cryptocurrencies. Furthermore, residents of Australia can deposit and withdraw funds using their bank accounts.
While cryptocurrency deposits are completely free, you are required to pay a fee to fund your trading account, make withdrawals, and trade through the CoinJar platform. In essence, you’ll need to pay a trading cost amounting to 1% of the trade for every transaction you make on the exchange. Please note that this trading fee is not particularly low when compared to the fees levied by other cryptocurrency trading platforms.
The Australia-based Digital Surge is an AUSTRAC-registered cryptocurrency exchange with a focus on providing customers with a secured platform to buy and sell cryptocurrencies in exchange for Australian dollars. There are more than 270 coins offered for trade through Digital Surge. Additionally, this exchange allows its users to pay their invoices in Bitcoin (BTC) instead of AUD.
This Bitcoin exchange features a straightforward and affordable trading fee model. Namely, the platform estimates your fees depending on your 30-day transaction volume. Also, the fees levied for the Instant Buy functionality are set at 0.5% of the total trade value.
On the downside, the Digital Surge exchange does not provide the option to pay with a debit/credit card, but with the variety of payment options and the selection of cryptocurrencies available, this should not be an issue for traders.
Binance is an international exchange that offers Bitcoin and cryptocurrency trading services for low transaction fees. Additionally, Binance offers a diverse array of investment products, such as margin trading, staking, and spot trading.
Binance’s Peer-to-Peer (P2P) service, which focuses on connecting traders to trade crypto directly between themselves on the exchange’s network, is undoubtedly the most popular feature of this low trading fees exchange.
Moreover, you can deposit funds on your Binance account in several popular fiat currencies, including AUD, USD, NZD, EUR, GBP, CAD, ZAR, to name a few. The customer support team of the exchange is available to you 24/7 if you need professional help with any of the functionalities of the platform.
The Bottom Line
To purchase cryptocurrencies in Australia, you must first identify a legitimate crypto exchange that is registered with the Australian Securities and Investments Commission (ASIC). You can be confident that your transactions are safeguarded when dealing with licensed crypto trading platforms.
It’s important to be mindful of the tax obligations while trading digital assets in Australia. Keeping track of your crypto trades and the taxes levied on them could save you from receiving unexpected correspondence from the Australian national revenue collection agency.
Disclaimer: Nothing in this article should be considered as an endorsement of cryptocurrencies or any particular company’s product, service, or offer. The information presented in this article is strictly for informational purposes and should not be construed as investment advice.
frequently asked questions
In order to authenticate the trader’s identity, platforms employ the Know Your Customer Protocol (KYC), a procedure that compares the individual’s first and last name, identification number, date and place of birth, and address of residence against a variety of Australian registries. Typically, the person will need to show a government-issued photo ID to prove they are who they say they are.
AML compares the trader’s name against a worldwide watch list to ensure the person isn’t wanted by the police for committing a crime. This inspection is valid for both Australians and non-Australian residents.
If the trader attempting to register an account with a crypto trading platform fails this screening, it signifies that their identity has been at least 90% identical to an identity included on the watch list. In such cases, a government-issued photo ID must be submitted as an additional check to verify the trader’s identity.
The AML procedure is conducted as a part of the registration process on a crypto trading platform in an attempt to eliminate traders with a suspicious background. In this way, it is possible to prevent any suspicious or fraudulent behaviour that would put the security of the exchange and the stored funds at risk.