The Australian Taxation Office (ATO) has announced its decision to impose capital gains tax (CGT) on wrapped cryptocurrency tokens. This would be regardless of their market value at the time of wrapping or unwrapping.
ATO’s Guidance on CGT for DeFi and Wrapped Tokens
Notably, the ATO’s stance on CGT treatment for decentralized finance and wrapped crypto tokens has been clarified in recent guidance. This move further reaffirms the ATO’s commitment to taxing Australians on capital gains associated with wrapping and unwrapping tokens.
Moreover, back in May 2022, the ATO identified crypto capital gains as one of its four key focus areas. Building on this initiative, the tax office has now provided detailed information on taxable actions within its jurisdiction. Notably, the transfer of crypto assets to an address not controlled by the sender or an address with an existing balance will be considered a taxable CGT event.
Taxing Liquidity Pool Users and DeFi Participants
The ATO’s statement also suggests a similar approach to taxing liquidity pool users, providers, and participants in decentralized finance (DeFi) regarding interest and rewards. The market value of the property received in exchange for transferring a crypto asset will determine the capital proceeds for the CGT event.
One significant clarification from the ATO is that wrapping or unwrapping tokens, regardless of their market price at the time, will trigger a capital gains tax event. The act of exchanging one crypto asset for another during wrapping or unwrapping is considered a taxable event.
Chloe White’s Critique
Chloe White, Managing Director of Genesis Block and Blockchain Australia adviser, criticized the ATO for breaching the technology neutrality principle. According to White, this breach has potential implications for the financial future of young Australians involved in the crypto space.
CoinSpot Hacked: A $2.4 Million Blow
In an additional blow to the Australian crypto community, local exchange CoinSpot reportedly suffered a hack. This resulted in a $2.4 million loss. The incident was attributed to a “probable private key compromise” in at least one of its hot wallets. Also, it adds further pressure to the challenges faced by Australian crypto enthusiasts.
As revealed by Etherscan, a transaction of 1,262 Ether, equivalent to $2.4 million, was moved from a known CoinSpot wallet to the alleged hacker’s wallet. Subsequent investigations unveiled a series of transactions converting the stolen ETH into Bitcoin via THORChain, spreading the funds across multiple wallet addresses.
Read More:
Uniswap Unveils Android Wallet App Revolutionizing Crypto Swaps
Cryptocurrency Emerges as Second Most Popular Investment in France