We recently ran a Court case against the ATO regarding the tax treatment of bitcoin in the AAT.
Sometimes Court cases look like they are about one topic, when they are actually exploring deeper and more significant issues that have far reaching consequences.
The Bitcoin case was one of those – and the results are in.
The heart of the question was how will the Court respond to new technology? Does it get updated or does it create a loophole?
Imagine if the law said you can’t send people spam by email. What if you create a software program that does it automatically? Does that mean you did it, or the computer did it?
The heart of the question was whether Bitcoin is a currency, as expressed within the Australian Constitution. This is important because the Government has powers under the constitution to regulate currency. It is important for Bitcoin to be a currency to enable the Government to have powers to regulate it.
In the Bitcoin case the Court had to consider whether the Government was regulating Bitcoin as a currency under the Constitution. In past cases the High Court had found that currency can include anything that is traded or used as a currency, even if it doesn’t have Government backing.
In this case, the Court had to consider whether that rule still stands – and said that it doesn’t – now currencies will only be currencies if they have the backing of a Government:
“But that is a question for law reform that will be answered by others on another day. For now, I must apply the law as it is, even if some might say it is imperfectly expressed.”
The result was this – if it isn’t issued by a Government then it isn’t a currency. Does that mean that the Government can’t use its regulatory powers over currency to regulate Bitcoin now? What about other cryptocurrencies? It seems like it.