It would be a great satisfaction for Naavi.org if G-20 of this year lead by India would put the last nail on the coffin of Bitcoin and Private Crypto Currencies.
I am surprised that despite the years of many of us pointing out that Private Cryptos are like the proverbial Bhasmasura which can destroy the creator himself, many professionals and academicians continue to spend time on discussing the virtues of Cryptos.
Fortunately, RBI is in the forefront of calling out the Private Cryptos as a “Ponzi Scheme”. I have repeatedly spoken on the need to ban Private Cryptos outright as can be observed from the many articles which can be accessed from the link below
Private Cryptos are the currency of criminals
In a recent discussion of the Central Banks of the G 20 countries at Bengaluru, IMF also strongly advised the group against granting legal tender status to Bitcoin. IMF has hitout at Elsalvador which prides itself as the first country to adopt Bitcoin as a legal tender.
IMF also set out a nine point plan of action for regulating Cryptos
The nine points stated by IMF are
The nine-point action plan includes the following:
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- Clarify the legal status of crypto assets and their treatment under existing laws and regulations.
- Ensure that effective regulatory frameworks are in place to address the risks associated with crypto assets, including money laundering, terrorism financing, and consumer protection.
- Enhance transparency and regulatory oversight of crypto asset activities and service providers.
- Implement robust anti-money laundering and counter-terrorism financing measures for crypto asset activities and service providers.
- Foster financial innovation and competition while ensuring a level playing field among different types of financial service providers.
- Ensure that the tax treatment of crypto assets is clear and consistent with the underlying economic activity.
- Develop international cooperation and coordination to address cross-border challenges posed by crypto assets.
- Monitor and analyze the potential macro-financial implications of crypto assets, including their impact on financial stability, monetary policy, and the international monetary system.
- Encourage research and analysis to enhance understanding of the underlying technology and economics of crypto assets.
A brief point to point comment on the above is provided below.
- Clarify the legal status of crypto assets and their treatment under existing laws and regulations.
- In India, Cryptos are electronic documents under ITA 2000.
- It can be called a Digital Asset.
- However, representing any Asset as a “Currency” is in violation of the RBI Act.
- Hence except for the CBDC which is a promissory note issued by RBI, every other digital asset touted and treated as “Currency” is illegal ab-initio.
- Ensure that effective regulatory frameworks are in place to address the risks associated with crypto assets, including money laundering, terrorism financing, and consumer protection.
- If it is clarified that “Crypto Currencies” are illegal , then all activities including running exchange, marketing etc are illegal per-se.
- Current laws related to money laundering, terrorism financing as well as consumer protection are adequate to regulate Private Cryptos if they are enforced.
- Enhance transparency and regulatory oversight of crypto asset activities and service providers.
- Any digital player dealing with Crypto Currencies is an “Intermediary under ITA 2000 and hence is regulated under ITA 2000.
- Meity needs to enforce its powers without hesitation.
- Implement robust anti-money laundering and counter-terrorism financing measures for crypto asset activities and service providers.
- If required, a separate wing may be created in ED to address Crypto currency related activities
- Foster financial innovation and competition while ensuring a level playing field among different types of financial service providers.
- Crypto currencies are hiding behind the “Block Chain” technology as if it is an innovation.
- Block Chain is nothing but a system of recording the transactions which are approved by multiple persons.
- If the approval is by a handful of persons, this is no different from Multiple Authentications which are a standard feature in Financial transactions
- There are only a few applications which require authentication from a large number of members from the public and they can be selectively allowed.
- Smart Contracts can be one of the innovations that needs to be accommodated.
- Ensure that the tax treatment of crypto assets is clear and consistent with the underlying economic activity
- Tax cannot regularize an illegal activity.
- The move to tax Bitcoin transactions and requiring it to be declared for tax purpose was an ill advised move which needs to be corrected.
- What is per-se illegal has to be confiscated and cannot be regularized on payment of tax.
- Hence this provision needs to be corrected.
- Develop international cooperation and coordination to address cross-border challenges posed by crypto assets.
- G 20 itself may provide a platform to strike out a multilateral treaty in this regard
- Monitor and analyze the potential macro-financial implications of crypto assets, including their impact on financial stability, monetary policy, and the international monetary system.
- Presume RBI has undertaken a similar exercise alrady
- Encourage research and analysis to enhance understanding of the underlying technology and economics of crypto assets.
- This should be done without providing an outlet for crypto currencies to resurface in the form of NFTs
Comments are welcome
Naavi
