Bitcoin, Cryptocurrencies and Blockchain

 Future of Crypto Legislation in India

What would be the picture of regulations expected in the new Crypto bill ?

 

We will cover certain aspects of legislation :

 

Ø  What would be the future of Legislation ?

 

Ø  What are the Prior areas for the Govt. for deciding legislation structure ?

 

Ø  What problems Govt. have with cryptos ?

 

You know current hot debate is crypto bill.

Biggest risk to cryptocurrenc

 Do you know the ‘Biggest risk to cryptocurrency is what?  

Normally we talk about such risk factors are ‘Hacking, Price volatility, Fadism, Technology’, etc.

But I believe, biggest risk to cryptocurrencies is from ‘Legislature/Regulator’ or governments of respective countries. 

Why I am saying it a biggest risk is because sometimes people in cryptos and Establishments/States/Governments are not aligned with each other. For most of the governments, crypto is something like Godzilla (big animal) has entered in the city and government is trying to figure out how to deal with it. Trial & Error approach is being used to control this biggest animal i.e. Cryptos. 

Government’s problem with cryptos?

•  What is the government’s problem with cryptos?
•  Where this legislation is being headed? 

Let’s understand :

   Security Vs. Utility tokens

 Here Security means stocks/bonds/shares etc. issued under proper established legislation like SEBI in India. Some of the entrepreneurs try to raise funds by issuing tokens which do not have any utility. It’s easy to raise funds through issuing tokens rather than issuing equity shares when crypto market is bullish and rules of equity can be bypassed, issues of boards and company setups can be overlooked. But this is detrimental to the crypto industry itself. Industry will definitely face pain in future in this area. 

Consumer protection : 

Governments think that consumers can be taken for a ride in this new evolving environment of cryptos. Consumer protection is of utmost priority for govenrments. Big crypto players must educate the community about the cryptos like WazirX and CoinDCX are doing in India. Community must be educated & alerted about how to identify the fake crypto schemes. Crypto exchanges must help the government in tackling crypto issues and designing the policy framework to regulate the industry.

Taxation 

I think with KYC norms, government is going to identify the points where cryptos must be taxed and crypto exchanges should be helpful to the government in this regard.

Capital flight 

Most of the Nations are concerned about the outward movements of their currencies from their countries. India is a good example of same. Govt. is worried that people may convert Indian rupees in to cryptocurrency and then cryptocurrency may move out of the country. Actually, already there are different laws in force to control flight of Indian rupees from India to outside. FEMA (Foreign Exchange Management Act) is the famous one of such laws.

Govt. is also worried about the inflow of foreign currency in the country from outside world. Govt. does not want such flow without coming it in to the notice of government. Again FEMA & other various laws are there in force to control such inflows. But again government thinks that through cryptos unaccounted inflow of foreign currency may come in the country and same may be used for illegitimate / criminal activities which may be detrimental to the economic / political / security of the Nation.  

Where this legislation is being headed? 

In India, prospects of legislation are bright because government is coming up with finding out the ways how to control such inflow/outflow of capital, how to tax cryptos, how to trace the movements of cryptos, how to control crypto exchanges, etc. Now, the fear of ‘Govt. Banning Cryptos’ is completely out of sight.

 One more major risk is that  different governments of various countries deal with cryptos differently, though cryptos is International issue. But again here, some good news was a few days ago. USA has formed a group of 30 countries (G20 & some more countries) to formalise some uniform policies to control cryptos worldwide something which can be compared with how banking works globally in uniform way.

What Indian legislator may do with regulations :                    

Types of regulations may belong to the ares like : 

1.     Control over the crypto exchanges : Govt. may ask the crypto centralized exchanges to come & register under the ambit of SEBI. SEBI may be ropped in to regulate the Indian crypto space. There may be guidelines fixed by SEBI for crypto exchanges like :

                                i.      Registration process of crypto exchanges

                              ii.     Registration of all cryptos available for trade at the exchange. Such cryptos may differ at various exchanges.

                            iii.    Approval for crypto assets from SEBI before coming them at the exchange for the                                   general public.

                            iv.     SEBI may approve/disapprove the crypto assets for listing at the exchange depending                              upon whether the crypto is traceable to the wallet or not like some cryptos can not be                              traced even to their wallets like Monero or say Public or private cryptos

              v.    SEBI may ask exchanges to raise their paid up capitals or SEBI may fix some                                          minimum limits on paid up capital of such exchanges.  Current position is majority of                              exchanges are working with paid up capital of Rs. One lac or near to this figure.

2.     Restrictions over individuals : Citizens / Residents in individual capacity may be barred from selling or buying cryptos directly without involving exchange. It means any crypto transaction between or among individuals must be routed through exchange. 

     3.     Wallets : Govt. may ban holding cryptos in private wallets like wallets at meta mask, trust                    wallet etc. Only wallets provided by centralized exchanges to hold cryptos will be allowed.                    Govt. also has plan to come with it’s own central wallet platform in the long run once CBDC is              launched.

     4.     Govt. may introduce various categories of licenses for different classes of                   blockchain & crypto players like :

                                i.   Blockchain consultants : who are such consultants

                  ii.  Crypto consultants

                 iii.  Crypto investment analysts

                 iv.  Crypto brokers or sub brokers

                 v.   Companies who want to use blockchain in their projects with or without cryptos

                vi.   Various financial service providers like in the field of micro finance: Govt. may allow use of blockchain in such cases with crypto or without crypto.