The Australian Tax Office recently announced that all of the retirement portfolios that have too many cryptocurrencies will be deemed illegal and therefore terminated if specific diversification didn’t occur.
To say it more bluntly, everybody that had a portfolio which was 90%+ a single asset like cryptocurrencies were not accepted by Australian law. This is derived from the dangers of speculation and putting one's eggs in one basket.
In a sense, it’s easy to understand why the Australian Tax Office started raising red flags about this practice, but many crypto enthusiasts are saying that it should be up to the individual themselves to take on the risk of losing it all if a single market crashes.
Furthermore, there are allegations against the ATO that they weren’t referring to cryptocurrencies as financial assets and therefore cannot enforce the investment portfolio law on them based on their past remarks.
The crypto community is split in two about this. Many are saying that it’s always healthy to diversify, while others are saying that the brunt of the risk should be taken by the investor themselves and should not have to conform to artificial norms.
Investors defend their decisions
Several investors have noted that even if their portfolio is overwhelmingly about cryptocurrencies, it needs to be mentioned that its not just one cryptocurrency. Dozens of people have said that they diversify between Bitcoin, popular altcoins and even stablecoins, therefore they technically follow the law.
However, it’s unlikely that the ATO will make exceptions just because there are different types of cryptos on a single account.
Several Australian market experts have also commented on why this law could be a new method of regulating how Australians invest in cryptocurrencies.
Andre Koch, a reporter for an Australian casino news resource has commented:
“The law for diversifying a portfolio has always been active, however it was always directed towards actual financial assets that weren’t liquid cash. Looking at how cryptocurrency adoption is starting to become more and more prevalent in Australia, I think that it’s absurd to classify them as financial assets when they’re clearly taking the role of money.
One such example is the number of crypto transactions on Aussie casinos. Nearly every single brand has added the option for paying with Bitcoin, Ethereum and various other altcoins, some have even created their own native tokens.
Many experts in Australian casinos think that this is yet another hit to reduce gambling in the country, which would be a massive hit to not only the companies but the local economy as well. You can take people out of gambling, but you can never take the gambling out of people. Aussies will always find something new to bet on. Therefore, might as well let them spend that money on local companies so that at least some of it returns to the economic circulation via corporate tax”
Issues with further adoption
Should the ATO double down on its demand to diversify retirement portfolios, the local crypto market will soon take a swing towards officially classifying cryptos as financial assets, therefore introducing potential securities taxes, capital gain taxes and whatnot.
Furthermore, neighboring New Zealand has recently adopted a law that would allow employers to pay their workers in cryptocurrencies, thus classifying them as liquid money. Should Australia go through with its decision, there will be very little room to introduce a similar law.
The last thing Aussies would want is falling behind on the world trends and being at a technological disadvantage when the rest of the world is trying to adopt the blockchain.