From US to Dubai: How world is acknowledging crypto's role in the global financial system - Times of India

From US to Dubai: How world is acknowledging crypto’s role in the global financial system – Times of India

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NEW DELHI: Cryptocurrencies have been extremely volatile in the last week with Bitcoin falling to its lowest on March 7 at $37,000 due to the Russia-Ukraine war and reaching its highest two days later on 9 March when US President Joe Biden signed an executive order directing the government to come up with a plan to regulate cryptocurrencies, recognizing their popularity and potential to destabilize traditional finance.
Impact of Biden move on crypto prices
Biden’s move is a response to “explosive growth” in digital assets, the increasing number of countries exploring central bank digital currencies. Since, then Bitcoin has shot up to $39,000, while the second-largest cryptocurrency Ethereum is trading at $2,500. The deliberative approach from the White House has cheered the market as the world’s largest economy shrugged doubts of immediate regulatory crackdown on the new age asset class
What is the executive order
The executive order is widely being seen as being ‘neutral’ towards digital currencies as it will start the process of creating regulations for digital currencies. The order comes at the time of heightened concerns on whether Russia will use cryptocurrency to evade sanctions that the United States has imposed on Russian President Vladimir V. Putin’s regime due to his invasion of Ukraine.
Biden has ordered federal agencies to dig into many of the problems that crypto created as it became more mainstream, including its role in money laundering and terrorist groups. The order is pillared on six main themes, which include national security, consumer protection, financial inclusion, and responsible innovation, and the impact of cryptocurrencies on the environment. The order also noted the exploration of a “U.S. Central Bank Digital Currency (CBDC) by placing urgency on its research and development, should issuance be deemed in the national interest, noting that its research and development should “ensure US financial leadership internationally”.
Industry experts are seeing the executive order as an acknowledgement of the role of crypto in the financial markets as well as in the global financial systems.
“There are two primary objectives of the Biden Administration’s executive order. First, to protect domestic consumers, investors, and businesses in the crypto industry. Second, to support the growth of American companies in the crypto industry. This clear and supportive stance by regulators towards consumer and companies in the digital assets space is a positive move.
Moreover, the Administration intends to promote affordable financial services for the country’s underbanked. Digital assets and digital assets companies working with the traditional banking sector will greatly help in this objective. This could lower costs, increase security, and bring more efficiency to the financial services sector,” said Darshan Bathija, CEO and Co-Founder of Vauld.
The Blockchain Association called the order “further proof that the crypto ecosystem is now a vital and inseparable part of the national economy.”
“While India has rightly taken note of the consumer and investor interest in the crypto industry and continues to calibrate its regulatory approach, the US approach is an opportunity to also consider the positive influence crypto can have on the competitiveness of a country in the global financial systems,” said Ashish Singhal, Founder and CEO, CoinSwitch.
Other developments that may have caused the rally in cryptocurrencies
Apart from Biden’s order, South Korea has elected its new President, who has been vocal over his ‘crypto friendly policies’ during his campaign. Yoon Suk-yeol of the conservative People Power Party has vowed to deregulate the crypto industry and introduce favorable tax laws for crypto investors.
Dubai too introduced crypto asset regulation last week and has joined the likes of Singapore, the US, UK, El Salvador, etc. which have rolled out laws on cryptocurrencies.
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Dubai’s ruler, Sheikh Mohammed Bin Rashid said that the emirate has enacted its first law governing virtual assets and has also formed an independent regulator to regulate the cryptocurrency sector.
“Adopting the virtual assets law and establishing the Dubai Virtual Assets Regulatory Authority is an essential step that establishes the UAE’s position in this sector, a step that aims to help the sector grow and protect investors,” he said.
A European parliamentary committee will vote on Monday on a new regulatory framework for crypto assets. Crypto-assets issued and/or traded in the EU “shall be subject to minimum environmental sustainability standards and set up and maintain a phased rollout plan to ensure compliance” with those requirements, according to the final draft for the law, dubbed MiCa, that was seen by Bloomberg.
The India angle
In India too, Finance Minister Nirmala Sitharaman said that she expected the Reserve Bank of India to launch a central bank digital currency (CBDC) or digital rupee “this year,” veering from her earlier statement that it would launch some time between 2022 and 2023. While China was the first country to embark on its journey back in 2014, India has been the latest to initiate research around CBDCs.
“Digital Rupee can democratize financial access as well as provide for programmable monies where the appropriate end use may also be specified to improve its efficacy. In a country like India which has a relatively large proportion of cash in circulation as a percentage of GDP as compared to other countries, Digital Rupee can play a big role in reducing the cost of cash. Non-interest bearing tokenised Digital Rupee is closest to cash and may pave way for retail CBDCs. Multicurrency CBDCs may follow trade flows and India can participate with countries who are large and stable trading partners,” said Monish Shah, Partner, Deloitte India.
While India is yet to formulate a structured regulation of virtual digital assets, it is unlikely that the government will go ahead and issue a policy framework before the US does.
The recent steps taken by government of United States and South Korea are steps towards recognition and potential adoption of digital currency into their financial regulation system, and the same is an indication of shift towards more digital, cashless, seamless, and financially inclusive order. From an Indian standpoint, the policy makers would be keeping a watchful eye on these developments, since such policies may pave the way ahead in formulation of legal framework for crypto in India,’ said Rishi Anand, Partner, DSK Legal.



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