Workplace Relations & Compliance Advisor
Clubs Queensland, [email protected], 07 3252 0770
Over the last decade with the development of new technologies, secondary payment methods other than legal tenders have started to gain some traction in Australia.
Some concepts become relevant in this economic area, that is cryptocurrency (otherwise known as crypto). The focus on crypto in the banking and financing sector has increased tenfold over the past few months as banks across the world slowly began offering crypto services to their customers.
Proponents of cryptocurrencies used this news to paint a positive future outlook for crypto, describing its limitless potential in our everchanging world and noting its gradual acceptance by leading global companies in the financial space as reasons attesting to its reliability and unrealised potential.
Critics saw nothing but risk and futility, pointing to the volatility of the markets and lack of underlying value, as well as the numerous instances where exchanges have been hacked as just some of the reasons.
As the Federal Government begins to regulate the digital asset market, in what has deemed to be the ‘crypto revolution’, the concerns held by critics are becoming no longer valid.
More people than ever before have begun dipping their toes in the market to familiarise themselves with and, stay ahead of the expected major legislative changes coming to the payment system.
With the rapid decline of the use of cash across the world, people are no doubt looking for more convenient ways to receive, handle and spend their money in this digital world.
In a recent survey conducted by Finder, it was discovered that crypto ownership in Australia is rising.
The survey showed that 22.9% of Australians now own crypto, a 16.8% increase from October’s survey in 2021.
As a result, companies across Australia are beginning to accept crypto as payment.
Some Australian businesses have gone as far as to pay their employees with crypto. Paying with crypto may very well become the norm in the foreseeable future. An idea that not long ago seemed far-fetched now seems probable.
Worth $1.85 trillion and awaiting imminent regulation from the Australian Government, should clubs seize the opportunity to branch into the crypto market and begin considering crypto as a form of payment?
What are Cryptocurrencies?
Cryptocurrencies are a form of digital financial asset or exchange that ensures that transactions are secured by going through a robust encryption process which, in some cases, utilises a distributed ledger or blockchain technology.
The blockchain records and transfers ownership of the crypto, and is guaranteed by cryptographic technology, rather than a bank or other trusted third party. This robust process, in turn, controls the number of any given crypto in circulation and makes it essentially impossible to counterfeit or double spend.
In one sense, crypto can be perceived as another form of money, however it differs from traditional currencies in several important ways.
First, they are typically decentralised with no central authority, such as a national or transnational central bank.
Second, there is no central issuing or regulating authority which underwrites the value of the currency or issues more currency into the system.
Third, unlike traditional currencies, cryptos do not possess any legislated or intrinsic value; their value is entirely set through transactions. This is primarily why cryptocurrencies tend to be extremely volatile.
Finally, the scarcity of any given crypto is maintained through equations which are used to verify transactions over the blockchain.
In essence, cryptocurrencies in one way can be perceived as a form of money which are generally built on blockchain technology and circulate without the need for a central monetary authority, such as a government or bank. Instead of a central issuing or regulating authority, a decentralised system is used to record payment transactions and issue new units.
What are the Advantages of Cryptocurrency?
The common advantages of cryptocurrencies are that it’s decentralised – not controlled by a centralised entity, borderless – payments can be sent and received anywhere in the world, captures a broad market – opens up a broader market of consumers, safe – data is stored within complex encrypted networks, and fast – most transactions and transfers are instant.
Accepting Cryptocurrency at Clubs
Clubs Queensland (Clubs QLD) has consulted the Queensland Government as to whether clubs can accept cryptocurrency as a form of payment for goods and services on offer. The Associations Incorporation Act 1981 (Qld), the main body of legislation governing the majority of clubs across Queensland, is silent on the subject of cryptocurrency. Therefore, the Government has advised that clubs are permitted to do so as long as tax considerations and reporting procedures are complied with. This will not apply to gaming where cash is required.
What is legally required by clubs before they are able to accept cryptocurrency?
It is important to ensure that clubs have efficient, stable and protected systems in place before considering cryptocurrency.
A good set of clear and structured policies will provide much needed clarity to members and patrons on important points, such as:
How Payments Work
Dispute Resolution Processes
Where to start?
Setting Up a Cryptocurrency Wallet
The club should first set up a cryptocurrency wallet and decide whether they would like to accept specific cryptocurrencies or any cryptocurrency.
There are two main types of cryptocurrency wallets, which include hot wallets and cold wallets.
Hot wallets are wallets that are hosted on the internet and are less secure and more susceptible to potential hackers.
Cold wallets are not connected to the internet, for example a physical hard drive.
Once the club has set up a wallet, the club will receive a public address, a QR code and a private key. The clubs will use the public address and QR code to enable customers to deposit crypto directly in the club’s business wallet. The private key is equivalent to a personalised ‘passcode’. This passcode should be written down in a secure place and clubs should avoid taking pictures of those passcodes.
The Australian Taxation Office sets out that a capital gains tax occurs when the club disposes of cryptocurrency.
Disposal occurs when the club:
Sells or gives away cryptocurrency;
Trades or exchanges cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency);
Converts cryptocurrency to fiat currency; or
Uses cryptocurrency to procure goods or services.
As per the Queensland Government’s advice, clubs should be aware of the tax implications associated with accepting crypto.
The expansion of this sector has received nothing but support from the Australian Government which has remained supportive of new and innovative financial services and products using or transacting cryptocurrencies.
However, the meteoric growth of cryptocurrencies presents novel challenges to regulatory bodies and therefore, extreme caution should be taken when branching into this burgeoning space.
Clubs should no doubt consider and research cryptocurrencies, however until either the Federal or State Government establishes a regulatory framework that is conducive to digital currencies, clubs should keep an eye out for now.