Cryptocurrencies in Regulatory Sandbox
Table of Contents
CRYPTO REGULATION
- Bitcoin, blockchain, crypto, regulations, governments, bans, unworthy, revolutionary, such a large amount of news articles on the topics, none with any real worldwide summary.
- Every country has their own recognition and legality towards bitcoin and its technology.
- The blockchain here could be a little résumé of what’s currently happening when governments face bitcoin.
CRYPTOCURRENCIES IN REGULATORY SANDBOX
- Nasscom is the tech industry’s lobby group, and they have asked RBI to in provide regulations for inclusions of cryptocurrency and crypto assets in the newly proposed regulatory sandbox proposed for the fintech industry.
- RBI published a draft enabling framework for regulatory sandbox, which intends to exclude cryptocurrency, initial coin offerings, and cash registry.
- The Nasscom claimed that since the crypto coins and tokens are an important component of the blockchain technology, the draft regulations provides for their exclusion from testing in smart contracts and other approved blockchain technology under the sandbox.
- Trade body pointed out that the regulatory sandbox in termed as an innovation in some countries like UK. They believe that the RBI should look at the bigger and better picture of the risks by including cryptocurrencies and crypto assets in the sandbox.
- Payment Council of India has also expressed their views, for having a more open structure for the sandbox. They belive that the boundaries shall not be deifned so early. They are constantly discussing about having an open framework instead of having a subset of existing laws since the objective of achieving the innovation would be defeated.
- Blockchain technology seems to have the potential to resolve issues involving security and governance by applying smart contracts and multi-party financial transactions and enabling digital identity.
CRYPTO TRANSACTIONS USING MASTERCARD
- Mastercard is looking to add cryptocurrency to its network. Under this, they will enable transactions of only ‘stable coins’ related to flat currencies. Such a service can be availed by the company’s cardholders.
- The company is planning to introduce various other currencies, in the near future and will also provide a proper banking structure in collaboration with the Indian Crypto exchanges.
- Mastercard is planning to allow its customers to use a few cryptocurrencies via its network, that will be in collaboration with a few corporates accepting digital tokens. They have already allowed their cardholders to transact in digital assets via external platforms. However, with the intention to support crypto partners, they will be providing various merchants in acknowledging digital tokens. This will indeed provide a less room for inefficiencies as the consumers and the merchants will need not have undertake conversion of money after every transaction.
- This initiative will help merchants in getting new customers who are already shifting towards digitised payments. Also, the sellers will be aided, in building loyalty with their existing customers.
- Mastercard has also came up in partnership with a few of the largest cryptocurrency firms including BitPay and Wirex.
U.S TAX POLICY CRYPTO TRANSACTIONS
- The Internal Revenue Services (IRS) of the United States, is a government agency, responsible for implementation of tax laws and collecting income and taxes from the taxpayers.
- U.S. issued a mandate regarding the reporting standards on crypto-assets with a fair market value higher than $10,000 to IRS. This was an addition to existing compliance, where the businesses have to report cash transactions of more than $10,000 to IRS.
- The U.S. government initiated the steps to get more transparency in crypto trading and holding. They have considered cryptocurrency regulation as a top priority in 2021, since a steep fluctuation in the price of digital assets, has sparked concerns of uninformed retail investments and market manipulation.
- A report was presented by the U.S. government stating that the crypto transactions shall pose a significant issue relating to illegal activity, including tax evasion.
- Thus, the new tax laws facilitate reporting of crypto transactions, which will be effective against prevention of tax frauds. U.S experts estimated that with such a compliance, there would be around $700 billion of tax revenue in the next ten years. And the regulating of the cryptocurrency exchanges will also benefit the investors and thereby provide a control over market manipulation.
CRYPTO STATUS BY CONTINENTS
THE FEARFUL ONES: TURKEY, INDIA AND CHINA
- India, Turkey and China are a number of the countries that although they’re intrigued by cryptocurrencies, they’re also frightened of it.
- Turkey decided some weeks ago to ban the utilization of cryptocurrency as a payment method thanks to its lack of regulation and possible losses thanks to the rate of exchange. The consequence of this action is to label cryptocurrencies just for trading and investment purposes, and not general payment use.
- Crypto trading volumes in Turkey hit 218 billion lira ($27 billion) from early February to March, up from just over 7 billion lira within the same period a year earlier, furthermore, trading spiked within the days after Erdogan replaced the bank governor, sending the lira down the maximum amount as 15%. this might be seen as cryptocurrencies being a possible threat to their currency and a fear of losing control sealing the ban decision.
- India has not yet banned crypto although they need voiced a proposition to try and do so, multiple times, which is intriguing when results showed that over $2 billion were being traded on the Indian crypto exchanges and that too in a month. This ban might be the results of the governments worrying about the fast-growing popularity of crypto trading.
- Nischal Shetty, who is the CEO of WazirX, a crypto exchange based in India, posted the details related to the trading volume of their exchange and in 2 months it went from an unknown platform to a number one Indian exchange, now struggling to stay up. The speculative situation and therefore the lack of control over it, bearing in mind that India raised an SOS to the globe some days ago, makes crypto a way to send money faraway from the country when it needs capital most.
- Still, this proposition doesn’t worry the large exchanges like Coinbase who are on a hiring spree in India.
- China is different from the opposite two countries. Gray (or half red on the map) is certainly its color. In 2017, ICOs were completely banned and various companies close up or moved. However, when observing the map and activities, it’s clear that P2P crypto trading still occurs within China.
- Above the quantity chart is that the P2P activity within China for the last 2 years that we all know of which is remaining steady. more small local P2P traders are active that go unadvertised within China.
- Officially crypto isn’t banned, but the country has made it very hard to try to any large-scale crypto business there. Big exchanges like Binance, the most important exchange within the world abstracted of China and adopted the employment of stable coins like USDT and enjoys an oversized lead which net-net may be a big loss for China.
- In the struggle to remain ahead within the financial industry, China has pushed hard on the CBDC front and is experimenting with public blockchain stable coins offshore in Labuan.
- There are other countries that appear to be within the rush towards blockchain and decentralized finance. In one article, a representative from ISTANEX, a Turkish crypto provider, resumed true within the Near East and within the remainder of the planet regarding the digital currency, explaining that lots of those countries actually fear the digital yuan but the risks are also overstated thanks to the CNY’s low volume at barely 5% use within global trade.
THE CURIOUS ONES: THE UNITED KINGDOM AND ALSO THE EU
- Meanwhile, within the EU and UK, the noise created by the blockchain is making these governments curious yet cautious. Located right within the middle between the US rules and China’s ban, these countries are conflicted in a way to best regulate cryptocurrencies. rather than treating them sort of a currency, they impose heavy tax rendering them more sort of a stock or other investments, despite the crypto also getting used as a currency.
- The UK harbors its pride to encourage innovative financial services and crypto startups, but on the opposite hand, a number of its leaders are making sweeping contradictory statements: Andrew Bailey, the governor of the Bank of England, issued a statement, warning the investors in respect of cryptocurrency and to be prepared for loosing all their hard-earned money.
- In Europe the increase of crypto acceptance is noticeable. In 2018, it had been found that only 7% of the nation had cryptocurrencies which correspond to a slow start. Although France kept the pace up within the last 2 years and also the final acceptance was seen when the French Economy Minister Bruno Le Maire offered to its European counterparts the establishment of one regulatory framework for crypto-assets starting by creating the Paris Blockchain Week so as to allow France the status of the crypto-nation. Around France, Italy and Spain have already allowed crypto, although don’t recognize their tender status qualifying cryptocurrencies as means of exchange, different from e-money by the regulators.
- A similar kind of rise was seen in the UK, where the number of investors, buying crypto, rose rapidly and increased by 558% since 2018 when just 3% of the population owned cryptocurrency before.
- Some weeks ago, Rishi Sunak, the English chancellor announced the creation of a top-level task force to explore the advantages and risks of a Bank of England digital currency for the United Kingdom which could possibly be named Bitcoin.
- However, a warning was issued by the Financial Conduct Authority, and informed the consumers to be prepared to lose all their money if they invest in schemes promising high returns from digital currencies like bitcoin. that individual announcement concurred closely with the United Kingdom Asset Manager Baillie Gifford investing about $100M in Blockchain.com, interesting it’s.
- It is safe to mention that the EU and therefore the UK are still within the discovery stage when it involves crypto yet still trying to determine new financial technologies like Bitcoin as a form of middleware technology that may work between traditional currencies and cryptocurrencies.
THE ADAPTIVE ONES: REPUBLIC OF KOREA AND THEREFORE THE US
- US, the land where anything is feasible but at the identical time not. As soon as crypto appeared and made waves about its use, the US accepted it and developed it and features a vicious body to regulate it: the SEC.
- The SEC is understood for being slow but meticulous. Once a crypto company is on their radar, you’ll take care no stone will go unturned. Ripple Labs was tried in court for months and still there is no clear decision as to their right to resume their activity or not.
- Despite the employment of contradictory regulatory environments, the US can still be considered the country with the foremost crypto businesses and also the largest for that matter, and with the looming potential for not just a Bitcoin ETF but also an Ethereum ETF, the US encompasses a chance to prove its adaptiveness.
- South Korea, is understood to be one in all the foremost advanced countries within the world and it’s only natural that crypto adoption would set out.
- Due to capital controls, there are crypto price premiums for purchasing and selling cryptocurrencies within Korea, this has led to even more trading activity which has triggered variety of regulatory announcements on crypto tax for 2022.
- Crackdown headlines begin shoring in a very bid to tame the markets. Just some weeks ago town government of Seoul seized $22 million in cryptocurrencies from individuals hiding their crypto assets on various exchanges. over m individuals were identified as tax evaders in Republic of Korea, inputting into question the country’s crypto tax heaven image.
- However, crypto continues to be on the increase in Korea and also the government hasn’t given any evidence of a blanket ban or any strong stance as of yet.
- The only seemingly big regulation imposed on crypto has been on allowing automated deposit and withdrawals which are only given to some select few older exchanges, and although these automated payments indeed creates an unfair competitive edge to the respective exchanges having them, it still gives crypto companies within the country something to strive for, especially the earliest and most experienced crypto businesses.
bitHolla is an example of an early South Korean company, founded by a world team that operates largely remotely, a key value of the crypto verse. Established for over 5 years, the Korean crypto service provider offers white-label crypto exchange software that enables for crypto-asset creation, exchange and wallet technologies to other businesses eager to connect crypto into their existing business. - It is no wonder that Asian nation is attracting global crypto talent as a rustic with the 4th most patents and playing an increasingly critical role in chip manufacturing and now the regularly top crypto trading volume within the world, South Korea could easily evolve into a crypto powerhouse.
PARALLEL ECONOMIES: AFRICA AND SOUTH AMERICA
- These emerging countries may be renamed the ‘smart ones’ as they’re using stable coins (USDT, USDC etc.) to avoid the rate inflation from their national currencies.
- Few countries’ inhabitants are often unbanked and crypto is that the best and sometimes only solution to try and do international business payments and safeguard against runaway inflation.
- One such example is that the Brazilian platform called Moeda who facilitates access to financing to local communities, and that they offer crypto technical support to businesses. this protects small businesses from browsing a standard financial intermediary and instead finds financing directly sourced through cryptocurrencies within the Moeda system.
- Moeda is utilizing the HollaEx Kit as their go-to crypto carpenter’s kit. The kit helps anyone to deploy their own crypto platform, coins and is that the technology utilized in the live demonstration of their crypto exchange deployment.
PRESSURE SITUATION FOR GOVERNMENT
- In summary, there’s still a true lack of data around crypto, and governments aren’t really within the game to clarify cryptocurrencies. Instead, many countries seem to be slowing down adoption by portraying crypto assets as extremely risky which extra protective measures are necessary so as to use them.
- How much regulation to use is that the big ongoing debate in 2021 as prices are attracting a replacement wave of cryptocurrency users.
- The truth is crypto at its core is sort of easy to grasp and has the potential to try to good for a country’s populace if only as an inflation hedging tool. But the 000 potential for crypto technology is in its leapfrog capabilities, where emerging countries can simply skip banking infrastructure and go straight to using public cryptocurrency blockchain infrastructure instead.
- And there’s big evidence that countries are indeed skipping banking infrastructure which is able to presumably push the planet into a kind of cryptocurrency age. Some countries are even setting out to integrate crypto mining within their nation planning and creating tax write-off incentives which is that the case for the little ex-soviet country of Georgia.
- However, the reaction of certain countries is showing a possible weakness of their economies. a stimulating fact is that both China and Republic of Korea limit foreigners from participating in local crypto trading on their platforms, whereas western platforms like Kraken span operations globally. This shows a particular hesitation by some Asian nations to open their economies to the planet in fear of capital flight. as an example, China or perhaps Republic of Korea are continually grappling with capital controls which makes regulating crypto difficult as fears of another Asian financial crisis wasn’t that way back within the memories of those countries.
- While already diverse countries just like the US and a few European countries are steadily weaving the technology into their already existing financial set-up through digital asset exchanges, sophisticated crypto custody and therefore the rise of CBDCs, it’s only a matter of your time that a crypto account are going to be provided within all western retail bank accounts.
- Whatever countries do with their crypto regulation one thing is certain, there’ll always be another country able to provide crypto investors, traders and businesses the incentives to try to work business in their country instead, which is commonly seen in case of Portugal and other smaller island nations.
- A light touch to regulation seems to be the sole path forward or miss out on the gains from what could possibly be the following base financial infrastructure of tomorrow.
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