Crypto Classification Dilemma: Is this assets, property, or commodities? Regulators around the world have produced various definitions of Cryptocurrency.
But there is no consensus, even among the main economies, about how to treat decentralized virtual currencies, which seem to cause risk of financial stability and have an impact on cross-border transactions.
Legal policy advisors and experts say most countries cannot formulate policies about the virtual currency because no precedent regardless of prohibition, most of which are not effective.
The growing popularity of Crypto has attracted the attention of parliamentarians because it can damage state supervision of monetary policy, capital flow, and illegal activities if left unchecked.
While only one country – El Salvador – has recognized Bitcoin as a legal tender, nine others, including China, has really forbid Crypto.
Forty-two countries such as Bangladesh have forbidden them ‘implicit’, which means banks are prohibited from dealing in Crypto directly or indirectly and Crypto exchanges are also prohibited, according to the Legal Library (US) Congress reports published in November last year.
“The lack of consensus in Crypto regulation is mainly caused by ambiguity on whether to treat Crypto as a ‘currency’ or ‘asset’.
Most people use it as speculative investments,” said Probal Bhaduri, managing partners in Lumiere Law Partners.
He added that the global parliamentary members also had difficulty understanding the technical aspects of Crypto.
“Crypto classification as a commodity can handle market and compliance risk, but not illegal activities, financial stability, systemic risks and capital flights,” said a policy report 4.0, a think tank founded by Tanvi Ratna Blockchain expert.
In the US, some countries saw Crypto well, but there were no federal rules.
For taxation, Crypto has been classified as ‘property’ since 2014.
The CFTC derivative regulator said Crypto was ‘commodity’, while Watchdog Watchdog SEC had not made a definitive statement about the treatment of Crypto.
The Indian government has not set its view, given that all wings are not aligned with problems – something that leads to the introduction of the proposed law is postponed until at least the next parliamentary session.
The RBI has called for a complete ban on Crypto as some of the restrictions will not function.
The Head of SBI Ajay Tyagi has asked the mutual fund company not to invest in assets related to Crypto to the government out with policy.
4.0 policy reports say that “make laws on paper and expect full compliance not feasible for a technology that makes it easy to cut control”.
The report cites examples of South Korea and China, where rules and prohibits are difficult, respectively, are not fully effective.
“As a prohibition enforcement is difficult and impractical, countries must find a strong regulatory framework for the cryptocurrency and educate investors at risk,” said Nitin Sharma, the main association of Lumiere’s legal partners.
According to him, the maturity of low investors & vulnerability to fraud and concerns related to terror financing & money laundering will be one of the main factors while dealing with Crypto.
International organizations such as the IMF and the WEF have noted that even though Crypto can help make cross-border payments efficiently and increase financial inclusion, also reasons for its popularity in developing countries – operational and systemic risks means that regulations need to be on a global agenda.
The IMF report in October said that even bank deposits and lent to the threat of Crypto.
A WEF report in September is registered four ways in which countries can deal with Crypto: ‘Wait & see’ such as Brazil, a balanced approach to Singapore and EU, comprehensive regulations such as Switzerland and Japan, and restrictive methods such as Turkey and Nigeria.
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Why do most countries cannot take firm decisions in Crypto
