• TOKEN2049: Key themes for investors in an evolving crypto market
Articles:

TOKEN2049: Key themes for investors in an evolving crypto market

07 May 2019

Original content provided by BDO Australia

Graham Croock , Director, BDO IT Advisory Services |

TOKEN2049 has been described as the premier crypto event in Asia. BDO in Brisbane’s in-house cryptocurrency expert, Maryna Kovalenko, attended the event that was held on 13 to 14 March 2019 in Hong Kong. The event featured in-depth explorations of the token economy and how digital currencies work on a global scale. There were more than 2,000 attendees, including representatives from Australia and New Zealand. From authors and business analysts, to early stage investors, entrepreneurs and executives from the world's largest digital currency exchanges, TOKEN2049 attracted all those who believe in technology and the power of cryptocurrency.

For Australian investors, four key themes emerged from the event:

A new gold standard?

Dr. Saifedean Ammous, Author of The Bitcoin Standard, was one of the event's premier speakers. His work introduces a powerful new concept - that bitcoin is the digital version of the gold standard.

Because bitcoin is decentralised, with no owner or authority governing it, the currency cannot be subject to arbitrary debasement. Ammous suggests that the most prosperous economic periods in history were so successful because of their sound monetary regimes, thus setting us up for a similar period if and when bitcoin becomes widespread.

Australians looking to invest in crypto as a long-term investment for at least 12 months will be eligible for a 50 per cent discount on their capital gains as an individual or trust, as per the current legislation. If you are looking to make a long-term investment in crypto through your SMSF, you will qualify for a one-third discount on your capital gains when your superfund sells or exchanges digital assets.

Bitcoin still the best

The next important panel for Australian investors came from crypto analysts Tone Vays, Murad Mahmudov and Arjun Balaji. They agreed that bitcoin remains the best currency to trade and invest in over altcoins, based on the market cap and price. Bitcoin has remained the most dominant and well supported digital asset on the market today.

If you are a trader or investor on the crypto market, it's essential to consider your classification as either a trader or investor for tax purpose, and put an early effort into tax planning to fully reap the rewards of your digital asset investments.

Large Crypto Exchanges remain the most comfortable

Another key theme came from representatives of six crypto exchanges - Coinbase, Binance, Huobi Group, eToro, Consuper and IDEX. They spoke about the operation of digital currency exchanges, and agreed that large exchanges are still operating comfortably, even when the market is experiencing low trading activity as it is now. In contrast, many micro exchanges are finding it challenging to keep sufficient liquidity for their users.

The speakers also noted that the most successful exchanges are the ones implementing robust internal accounting systems and security to keep track of user funds and activities - they are thinking about user compliance, not just their own compliance, and investors must do the same.

It’s vital for those managing exchanges to remember there are large tax compliance requirements, and they should take part in regular and thorough tax planning.

RegTech for Security Tokens

Finally, Adam Vaziri, CEO of Blockpass,spoke about the move from ICOs to STOs. He mentioned that STOs are experiencing significant growth, as investors have become necessarily wary of ICOs. As a result, we are seeing a move from startups towards funding models that comply with domestic securities laws.. Investors must still be aware of what the security backing is behind an STO, particularly how it's treated for tax with regard to debt versus equity. Startups and established business looking to raise capital through a STO should carefully consider the ideal structure both from a tax and legal perspective. This is especially important for startups who are looking to reap the tax benefits of being classified as an Early Stage Investment Company (ESIC).

A young and innovative market

The cryptocurrency market is young, and yet it has already created a large audience of early investors and believers. What's more, it has created significant innovations in just 10 years of operation.  We have already witnessed the early boom and burn of rushed, botched and outright deceptive ICOs. We expect the companies that last decades into the future will not only be the ones that are best at innovating, but also those best able to work with domestic regulation and successfully open channels of trust to governments, industry and consumers.

Business and individuals that are all in or wanting to enter the market must consider smart tax strategies - which is where BDO can help. Not only do we understand the complexity of the tax and compliance landscape, we also have a crypto tax expert in-house, Maryna Kovalenko, who understands the technology of cryptocurrency. This means we know how to help you stay compliant and succeed. If you would like to discuss how we can help with our smart tax solutions, please contact us today.


Disclaimer:

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings, etc., as at the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances.

The financial product advice or information in this document is of general nature only and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser, whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.