crypto Classification Dilemma: Is It a Property, Property or Object?
Regulators around the world have come up with different definitions of cryptocurrencies. But even in major economies, there is no consensus on how to treat decentralized virtual currencies, which pose risks to financial stability and affect cross-border transactions.
Policy advisors and legal experts say most countries are unable to make policy on virtual currencies because there is no precedent other than sanctions, which have been largely ineffective. The growing popularity of crypto has attracted the attention of lawmakers because it can undermine monetary policy, capital flows and state oversight on illegal activity if left unchecked.
While only one country – El Salvador – has recognized bitcoin as legal tender, nine others, including China, have banned the crypto altogether. Forty-two countries such as Bangladesh have banned it ‘implicitly’, meaning banks are prohibited from transacting directly or indirectly in crypto and crypto exchanges have also been banned, as defined by law. The Library of Congress (US) report was published in November last year.
“The lack of consensus on crypto regulation is mainly due to the ambiguity of whether crypto is to be treated as a ‘currency’ or an ‘asset’. Most of the people are using it as a speculative investment.” probel bhaduri, managing partner Lumire Law Partners, He added that even lawmakers globally are finding it difficult to understand the technical aspects of crypto.
A report by Policy 4.0, a think tank founded by a blockchain expert, states, “Classifying crypto as a commodity can address market and compliance risks, but not illicit activities, financial stability, systemic and capital flight risks. ” Tanvi Ratna.
In the US, some states view crypto favorably, but there is no federal regulation. As for taxation, crypto has been classified as an ‘asset’ since 2014. Derivatives regulator CFTC has said that crypto is a ‘commodity’, while market watchdog SEC has not made any definitive statement on the treatment of crypto.
The Indian government has yet to firm up its view, noting that not all wings are co-ordinated on the issue – something that led to the postponement of the proposed legislation until at least the next Parliament session. reserve Bank of India Called for a complete ban on crypto because it said partial restrictions would not work. SEBI President Ajay Tyagi The government has asked mutual fund companies not to invest in crypto-related assets until a policy is put in place.
The Policy 4.0 report states that “Law on paper and expect full compliance is not feasible for a technology that makes it easy to bypass controls”. The report cited the examples of South Korea and China, where stricter regulations and sanctions have not been fully effective, respectively.
“As the ban is both difficult and impractical to enforce, countries should establish strong regulatory frameworks on cryptocurrencies and educate investors on the risks,” said Nitin Sharma, principal associate at Lumiere Law Partners. According to him, low investor maturity and fraud susceptibility and concerns related to terrorism financing and money laundering will be one of the key factors in tackling crypto.
International organizations such as the IMF and WEF have noted that although crypto can help to make cross-border payments efficient and improve financial inclusion, it is also a reason for its popularity in emerging economies – due to its operational and systemic risks. Meaning that regulation has to be on the global agenda. ,
An IMF report in October stated that even bank deposits and lending face threats from crypto.
A WEF report in September listed four ways in which countries could tackle crypto: a ‘wait and see’ approach like Brazil, a balanced approach like Singapore and the European Union, broader regulation like Switzerland and Japan, and Turkey. and restrictive methods like Nigeria.