Understanding the Legal and Practical Status of Crypto in Australia
The rise of cryptocurrency has created new questions in legal, financial, and regulatory circles. A common question asked by clients is: is crypto money? The answer depends on how one defines “money,” and in what context.
From a legal standpoint, cryptocurrency is not legal tender in Australia. The Reserve Bank of Australia recognises only Australian dollars as legal tender under the Currency Act 1965 (Cth). This means no person is legally obliged to accept Bitcoin or Ethereum or any other cryptocurrency as payment for goods or services.
However, cryptocurrencies can function sort of like money in private transactions. If two parties agree to settle a debt or transact using a cryptocurrency, that agreement is generally enforceable. Legally, it is treated as an asset, and so settling a debt in this way is an agreement to accept “payment in kind”. The Australian Taxation Office (ATO), for instance, treats crypto as property for tax purposes, and it is subject to capital gains tax when disposed of.
Economically, money serves three main functions: as a medium of exchange, a store of value, and a unit of account. Cryptocurrencies partially meet these functions. While they can be used to buy goods and services, their volatility makes them a poor unit of account and an uncertain store of value.
Globally, some jurisdictions have gone further. El Salvador famously recognised Bitcoin as legal tender in 2021, and Central African Nation followed suit. Both have repealed the laws recognising Bitcoin as legal tender. Others, including the European Union, are implementing regulatory frameworks treating crypto-assets as financial instruments.
In summary, cryptocurrency is not legally “money” in Australia, but it can act like money in practice, in some ways. As regulation continues to evolve, businesses and individuals should be aware of both the opportunities and legal obligations involved in using crypto as a means of exchange or investment.