As India gears up to regulate cryptocurrency trade, fear is growing about the possible fallout of the move on this burgeoning and volatile industry. The government has decided to introduce legislation in the Winter Session of Parliament, set to begin on November 29, to restrict and regulate the crypto trade in the country. When the news broke, earlier this week, the crypto market saw a steep crash, but it has stabilised since. So, it’s a good time to reflect on how this highly speculative industry is regulated around the world.
The US has a dual system of governance, like India, under which laws vary from state to state. Each American state has its own laws to regulate cryptocurrencies but largely at the country-level, the sentiment is positive towards the trading community. In any case, the US is known to support business opportunities, and so a ban on crypto trading is highly unlikely unless this industry throws up unmanageable risks to the existing financial system.
As is the case with most countries, the UK has not formulated comprehensive legislation on regulating cryptocurrency. However, under the current system, it grants licenses to registered businesses dealing in crypto trading (for example online exchanges). It taxes gains from these trades just like any other gains from currency trading.
Cryptocurrency trade in China is a difficult proposition. After initially allowing people to trade or mine crypto coins, it started cracking down on mining activities earlier this year and banned the trade in June. Reports say most miners of significant infrastructure had to move out of the country to continue their operations. China is developing a digital version of its currency, Yuan, and is testing the centrally regulated crypto coin.
The European Union
Being a grouping of 27-member countries (after the exit of the UK), forming legislation applicable to all members is complicated. While member countries have their own framework on how to deal with this emerging industry, the block as a whole is considering a collective approach. The European Commission released the draft Markets in Crypto-Assets Regulation (MiCA) legislation in September 2020. When it comes into effect, the legislation will treat cryptocurrency as regulated financial instruments which will require approval from regulators.
In September, the South American country became the first in the world to officially launch Bitcoin as a legal currency alongside the US dollar. President Nayib Bukele has positioned Bitcoin as a way to reduce poverty and bring more people into the banking network. Its rollout of Bitcoin was fraught with problems.