Cryptic with cryptocurrency

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Cryptocurrency is a virtual or digital currency which allows people to pay for goods and services directly through an online system. It has no legislated or intrinsic value and it is simply worth what people are willing to pay for it on the open market.

There are many types of cryptocurrency, with the most well-known being Bitcoin, but others include Litecoin, Peercoin and Dogecoin. In contrast, official currencies of a country, such as the Australian or US dollar, derive their value from being legislated as legal tender of that country.

So, is it possible for an SMSF to acquire cryptocurrency and comply with the Superannuation Industry (Supervision) Act 1993 (SIS Act) and Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations)?

Here are 10 things to know about cryptocurrency and SMSFs.

1. Is cryptocurrency considered to be currency or money?

In Australia, cryptocurrency is not legal tender nor is it a 'foreign currency' for the purpose of the Australian taxation law as per Taxation Determination TD 2014/25 Income tax: is bitcoin a 'foreign currency' for the purposes of Division 775 of the Income Tax Assessment Act 1997?

Under the Currency Act 1965, the currency unit is the Australian dollar and is the only recognised form of payment.

On 7 September 2021, cryptocurrency was recognised as legal tender in El Salvador alongside the US dollar, which is its other official currency. It remains to be seen whether other countries will recognise as the decision in El Salvador to be considered as a currency of a 'foreign country'.