ATO Outlines Tax Guidelines on Crypto Token Handling; CoinSpot Faces Cyber Attack
Summary:
The Australian Taxation Office (ATO) has issued guidelines on the capital gains tax implications of decentralized finance and wrapping cryptocurrency tokens, reinforcing its stance on taxing Australians on capital gains from these activities. The ATO has also included transfers of cryptocurrency assets outside the taxa payer's control as triggering a CGT event. Further, the authority has made it clear that processes involving wrapping or unwrapping of crypto tokens will prompt a CGT event. This move has drawn criticism from industry figures claiming it compromises the principle of technological neutrality and could harm the financial prospects of young Australians. Meanwhile, local crypto exchange CoinSpot reportedly lost $2.4 million due to a probable hacking incident.
The Australian Taxation Office (ATO) has issued instructions on the taxation of capital gains from decentralized finance (DeFi) and cryptocurrency token wrapping activities. The tax authority has reiterated its position of applying capital gains tax (CGT) to Australians wrapping and unwrapping tokens. The ATO had earlier, in May 2022, identified crypto-capital gains as a key area of focus. It has now further defined a range of taxable activities within its purview. According to the ATO, any transfer of cryptocurrency assets to an address not under the sender's control or that holds a balance will be considered a taxable CGT event.
The ATO's statement explained the capital proceeds from the CGT event are determined by the market value of the asset received as a result of transferring the cryptocurrency. The CGT event will be triggered based on whether the individual records a capital gain or loss. The same tax strategy is being considered for liquidity pool users, providers, as well as DeFi interests and rewards.
Furthermore, the process of wrapping and unwrapping tokens will also be a triggering point for a CGT event. The ATO has stated that any scenario involving the wrapping or unwrapping of a cryptocurrency asset, regardless of its value, is subject to capital gains tax.
Genesis Block's managing director Chloe White has criticized the ATO's approach, claiming it is a violation of the principle of technology neutrality and negatively impacts the financial future of young Australians.
In a related development, there have been additional pressures on Australians as the local cryptocurrency exchange CoinSpot, was reportedly compromised, leading to a loss of $2.4 million, believed to be through unauthorized access to its hot wallets’ private keys.
As reported earlier, blockchain analytics platform Etherscan showed that 1,262 Ether (ETH) — equivalent to $2.4 million — was moved from a recognized CoinSpot wallet to an alleged hacker's wallet. It appears that the attacker converted the stolen ETH into Bitcoin (BTC) using THORChain, and subsequently distributed it across various wallet addresses.
Published At
11/14/2023 8:19:48 AM
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