Financial comparison site Finder is promising investors a 4.01% return on capital funnelled into its new cryptocurrency product, hoping competitive kickbacks and zero account fees will lure the crypto-curious — and that potential tax liabilities won’t scare them away.
Finder Earn launched on Monday, allowing 200 pre-registered users to deposit up to AUD$10,000 into the platform’s Finder Cash Wallet app.
The company says it will effectively ‘borrow’ that capital to expand the company’s investments in the booming cryptocurrency scene.
Finder believes its forays in the market will outperform the 4.01% returns it has guaranteed to Earn users, allowing Finder to provide returns far more competitive than the current interest rates on traditional savings accounts.
For the privilege of handing their hard-earned money to Finder, Earn users will be reimbursed with an equal amount of ‘stablecoins’ — a type of cryptocurrency pegged to the value of a fiat currency in order to cut down on price volatility.
Earn uses the privately-owned TrueAUD (TAUD) protocol, which promises blockchain tokens of equivalent worth to hard Australian currency.
Finder says it will pay interest in these TAUD tokens, with returns compounding daily.
Users are able to withdraw and deposit as they see fit, and Finder says Earn will be fee-free.
With its new product, Finder hopes to split the difference between savings accounts, investment portfolios, and unguarded cryptocurrency trading, Finder personal finance expert Kate Browne told Business Insider Australia.
Earn finds a market “sweet spot” near cryptocurrency investing, “which can be very volatile still and isn’t for the faint hearted,” she said.
“But Earn is a bit edgier and will make your money work harder than, say, a traditional savings account where you can have a very low interest rate.”
The company will also shield users from the costs of its own cryptocurrency investments, Browne said.
“Any fees, any kind of implications at the back end are on Finder [and] are completely uncoupled from our members,” she said.
Tax obligations a question for your accountant: Finder
Cryptocurrency exchanges like Binance already allow Australian users to ‘stake’ their cryptocurrency holdings to earn a return, and Commonwealth Bank is dabbling with its own in-app cryptocurrency functionality, but Earn is likely the first Australian offering of its kind.
However, users might face some familiar tax implications when they turn their TAUD holdings back into ordinary Australian currency.
Mark Chapman, director of tax communications at H&R Block, said interest paid as cryptocurrency still counts as assessable income, just like old-fashioned bank interest.
“This will be no different,” he said.
“The amount that’s included in assessable income will be the amount of the cryptocurrency at the market value on the date you receive it.”
With TAUD theoretically stapled to the Australian dollar, that means every TAUD paid in interest would be taxed as if it were a regular Australian dollar.
Earn’s tax considerations would be more complex it used a cryptocurrency which is not pegged to Australian tender.
The Australian Taxation Office states converting a cryptocurrency back into fiat currency can cause a capital gains tax (CGT) event.
But the supposed parity of TAUD and old-fashioned Australian currency may eliminate that problem, Chapman said.
“For CGT purposes, the base cost and the sales proceeds will always be identical – meaning that the transaction is neutral from a capital gains tax point of view,” he said.
“For example, if the investor receives crypto with a value of $100 in interest, when he comes to sell the crypto he will still get $100 as it is pegged to the value of the Australian dollar.”
Simply put, there should be no ‘gains’ to tax whenever an Earn user withdraws from their account.
That scenario could change drastically if the price of TAUD somehow exceeds that of the Australian dollar, leaving users with definite capital gains – and capital gains tax liabilities.
Finder says stablecoins are “rarely volatile”, and Browne claimed its chosen stablecoin “isn’t as high risk or as volatile as, say, investing in Bitcoin or Ethereum”.
Nevertheless, Finder has advised users that “gains made on your loan to us may be taxable events for you”.
“It would really only be a question for your own accountant around that,” Browne said of individual tax liabilities.
“Any other kind of complex fees around that stablecoin, or in fact, tax implications, that is all sitting at the back end of Finder.”
Stablecoins and crypto products thrust into the spotlight
Finder Earn represents one of the most high-profile uses of stablecoins in Australia, but regulators are already well aware of the growing sector.
The Reserve Bank of Australia this month took a dim view of private cryptocurrencies, with the central bank last arguing stablecoins “should be subject to regulation that ensured they were safe for users and promoted financial stability”.
The reserve is also investigating the concept of a central bank digital currency, which, if created, would act as an official digital version of the Australian dollar — posing new questions for the value of Australian dollar-linked stablecoins like TAUD.
In Earn, Finder is also stepping into the largely unguarded world of blockchain-based financial products, whose regulatory environment could be radically reshaped by government intervention.
Unlike a traditional savings account, which are subject to the Australian Government’s financial claims scheme, an Earn user’s holdings would not be guaranteed if Finder Wallet were to default.
Lawmakers are actively considering this kind of risk.
A landmark Senate committee report, handed down last month, found Australia “needs a robust policy and regulatory framework for digital assets, in order to protect consumers, promote investment in Australia and deliver enhanced market competition”.
Finder has actively participated in those committee proceedings, Browne said, voicing her confidence that products like Earn won’t be swiped away by future regulation.
“Australia’s very open to kind of trying things like [cryptocurrency],” she said. “I think the public is certainly on board.”
“Governments don’t always move fast,” Browne added.
“But we were certainly very, very pleased that there’s been interest and reports produced on fintech in Australia.”