The COVID-19 pandemic has brought on many new trends; remote working, active wear, online shopping and crypto-currency investment. In fact, approximately 17% of Australians own crypto-currencies, one-in-five of them are Millennials. Even with its high volatility, the fastest growing demographics for crypto-currency are Gen Z and women.
The creation and trading of crypto-currencies are largely unregulated. They do not offer the same kind of transparency as stocks and bonds traded on the ASX. However, for some, this can be its appeal.
Crypto-currency is a highly speculative market
Whilst one reason investors purchase crypto-currency is to diversify of their portfolio, another common reason is because they believe it will earn them a ‘quick buck’. However, there are currently no specific laws regulating the trading of crypto-currency, other than tax laws, in Australia. So, any losses incurred due to hacking or collapse of the trading platform are not likely to be recoverable.
We strongly suggest you seek financial advice before purchasing crypto-currency.
Crypto-currency basics
Here are the basics of how people invest in crypto-currency.
Platforms
There are more than 20 trading platforms that will allow you to buy and sell crypto-currency in AUD. Each have their own advantages, such as ease of use, low fees, variety of altcoins (anything other than Bitcoin) available or methods of payment.
If you are going to invest in crypto-currency, we suggest you do your research based on authenticity and security of the platform, and find the one that suits your needs best.
Accounts
The trading of crypto-currency is subject to Australian anti-money laundering and counter-terrorism financing regulations. A platform that adheres to these regulations will usually require you to provide some form of personal ID to create an account. Once the account is set up, you will need a digital wallet to hold your currency. This digital wallet should come with a password and pin, but the government warns to be careful of hackers. Due to the anonymous nature of the currency, you will have no protection against unauthorised or incorrect transactions from your digital wallet.
Purchasing
Once an account is set up, you are generally able to trade a fairly minimal amount such as $25. You generally just need to enter how much of the currency you want to buy into the buy/trade section of your account and confirm your purchase. Tip: Make sure the currency you want to invest in is offered on the platform you have chosen.
To understand the tax implication, refer to our previous blog – Tax Implications of owning crypto-currency
If you have any questions on this, please contact your TAG advisor for further information on 03 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2021. Please do not reproduce without the expressed written consent of the author.