Know the Need to Regulate Cryptocurrencies

During the current winter sitting of Parliament, the Indian government plans to introduce a measure to categorize cryptocurrencies. They will also see to financial assets while protecting the interests of small investors.

The measure is likely to impose a minimum investment amount in cryptocurrencies. It will also prohibit their usage as legal money or currency replacements.

According to an NDTV report, the law also lays the basis for forming an official digital currency to be issued by the Reserve Bank of India (RBI) and controlled under the RBI Act.

Digital Yuan is the next central bank digital currency and cannot be pickpocketed. It does not require carrying the extra charge in your pocket.

Cryptocurrency regulation is critical from the perspective of investors. The government can make the cryptocurrency market safer for investors by enacting the appropriate laws.

In this sense, India has taken a step ahead by considering the legalization of these currencies. Suppose the growth of cryptocurrencies in India is regulated.

In that case, certain requirements will be in places, such as a registration process KYC norm, transaction scrutiny in the form of necessary bank transfers for cryptocurrency sales.

Also, there will be quoting of Permanent Account Number and Adhaar card, and reporting declaration of profits sales. There will be gains from cryptocurrency trading or business activity.

Mentioned below are the five reasons why cryptocurrencies need to regulate.

• Prevent market manipulation and protect investors: Market manipulation and price volatility are widespread in the cryptocurrency world. Consider Bitcoin, the world’s oldest and most prominent cryptocurrency, which reached all-time highs in early 2021 before collapsing and losing a significant portion of its value.
• As a result of the lack of official information on these digital assets and the technical complexity involved with them.
• Allow only a few coins: There are thousands of cryptocurrencies worldwide. On the other hand, most investors are only familiar with a few of them, including Bitcoin, Ether, Ripple, and Dogecoin.
• They have little awareness of the tens of thousands of additional virtual assets. To protect customers, a regulatory entity clearing Bitcoin is needed, one that can reveal all information about the performance of digital assets, their hazards, and their potential.
• Online fraud and the cyber security risks- Understanding the dangers of technology: Technology is progressing at a dizzying speed. This poses a huge risk, as such developments could render technology, including Blockchain, obsolete in the future.
• Given the rapid technological change, cryptocurrency-specific information infrastructure and experienced financial advisors are essential. As a result, investors will have a better understanding of the technological hazards associated with cryptocurrencies and will be able to make more informed judgments.
•  Money laundering – Any unregulated system has the potential to fuel illegal activity. As a result, there is requirement of  customer due to diligence process , similar to a bank.
• When purchasing or selling Bitcoin, this might help keep track of investors’ genuine identities and verify their whereabouts. Any breaking of these standards should be dealt with harsh penalties.

Cryptocurrencies and the Regulators Dilemma

No matter your view over the cryptocurrency rage, it has the potential to agitate financial policy across the globe effectively. With hundreds of new tokens given each month, it shows as though the attempt to regulate cryptocurrencies will always remain a game of cat and mouse.

• Cryptocurrencies, often regarded as a threat to traditional banking and financial institutions, have gained substantial popularity in the previous half-decade while also posing a regulatory nightmare for banking authorities worldwide.
• Governments and regulatory agencies have debated whether to restrict the emergence of cryptocurrencies rather than simply allowing them to flourish without regulation and interference.
• While the US Senate held a hearing on Bitcoin in 2013, the Standing Committee on Banking, Trade, and Commerce of the Canadian Senate conducted a thorough investigation into the use of digital money in 2014.
• The legal approval of cryptocurrencies as a legal instrument now differs by country; while some are drafting rules and regulations, others have yet to respond to this disruptive upheaval.
• The growing use of cryptocurrencies in terror financing, ransomware, the illicit drug or arms trade, and cybercrime has also sparked security and law enforcement concerns.
• The Reserve Bank of India has been holding a close eye on the popularity of cryptocurrencies.  In May 2017, the Ministry of Finance held a public consultation on virtual currency regulation. The overriding law, monitoring, consumer protection, and security provide regulatory authorities with a dilemma.
• Perhaps the future of cryptocurrencies as legal vehicles for the exchange of goods and services, or for that matter, payments, will remain questionable.
• Some of these are technical difficulties, such as platform security and dispute resolution. In contrast, other policies, such as regulation, liquidity, price volatility, and consumer protection, are far more difficult to overcome.
• On the other hand, Cryptocurrencies are a completely new payment system with considerable privacy benefits for consumers. Still, they also offer huge security, counter-terrorism, law enforcement, and taxation concerns.

There are three likely directions in which the future discourse on cryptocurrencies will go-

1. a) Let cryptocurrencies increase according to market dynamics without intervention;
2. b) Regulate this segment, designating a status such as a legal instrument or capital asset with safeguards for protection against risks such as terror financing, illicit trade, or tax evasion and prohibit them, given the security risks to the state and perils to the economy.

The wrapping up

Cryptocurrencies are a disruptive technology that has already transformed conventional electronic payment, money transfer, and policy and regulatory systems.

Due to existing limits about the jurisdiction and authority over cryptocurrencies, such regulation would still fail to address the growing hazards of price volatility, security breaches, and a lack of consumer protection mechanisms.

Yuan pay group, a cryptocurrency exchange system, is functional and does not rely on the market outcome. To promote its service, this system employs cutting-edge innovation and effective marketing strategies.