A Toss of A (Bit)Coin: The Uncertain Nature of the Legal Status of Cryptocurrencies

Abstract

Professor Julie Cassidy (Professor of Law and Taxation, University of Auckland, Commercial Law Department), Dr Man Huang Alvin Cheng (Lecturer, Department of Finance and Accounting, The University of Nottingham), Dr Eva Huang (Lecturer, The University of Sydney, School of Business) and Dr Toan Le (Lecturer, Monash University, Department of Commercial Law and Taxation) Fintech is becoming mainstream in facilitating transactions. Blockchain technology, from its humble beginning as a decentralised encrypted form of record keeping has moved to the mainstream. The advent of cryptocurrencies as a result of blockchain technology is a more novel Fintech development. Based on similar technology, hundreds of cryptocurrencies are being created and traded. Bitcoins are by far the most popular cryptocurrency, but many others exist. The popular “coins” fluctuate dramatically in “prices”, where realised and unrealised gains are being made by coin-holders. This paper is the first part of a two part broader analysis of the tax treatment of cryptocurrencies. The current analysis is confined to four key Asian Nations, China, Vietnam, South Korea and Japan. These nations have been specifically selected as they represent the extreme positions that have been taken in this context. At one end of the spectrum, China has effectively banned trading in cryptocurrencies, particularly bitcoin. Vietnam has cautiously approached the issue, reflecting its infancy in the area of cryptocurrencies, by banning payment by cryptocurrencies. Payment by cryptocurrency is considered illegal. Nevertheless, the government has not totally banned cryptocurrency. It still recognises it as property, thus an asset that may be invested and traded. Japan, by contrast, has taken the polaristic view that cyroptocurrencies are “currency” and sought to support and foster trading in same. Korea had originally followed the lead of Japan, but recently has done a back flip in this regard. In a way the Korean government has embraced a hybrid view. While no longer treating cryptocurrency as a “currency”, the government has asserted it will not ban trading in cryptocurrencies. It will, however, highly regulate this market. Concerned for the use of such transaction to launder money, the identity of participants to a trade must match the names of the holders of local bank accounts.This is to prevent anonymous trades and trading by non-nationals. Vietnam has cautiously approached the issue, reflecting its infancy in the area of cryptocurrencies, by banning payment by cryptocurrencies. Payment by cryptocurrency is considered illegal. Nevertheless, the government has not totally banned cryptocurrency. It still recognises it is property, thus an asset that may be invested and traded