Here’s how the USA, China and India are regulating cryptocurrency.
There are many ethical concerns surrounding cryptocurrency – from scams to terrorist and other illegal activities. There is also a lot of uncertainty and volatility. For instance, in June 2014, a Bitcoin exchange called Mt. Gox went offline. The owners lost nearly 750,000 Bitcoins, resulting in an estimated loss of US$400 million. Despite that, the cryptocurrency economy continues to boom. The price of one Bitcoin has increased by six times over the past 12 months. The instability and unreliability surrounding cryptocurrency call for regulations and control to safeguard people and a nation’s economy. Here’s a look at the legal ethics surrounding cryptocurrency from around the world.
Cryptocurrency laws in the US
It is legal to exchange cryptocurrency in the US, but the regulation varies from state to state. Different agencies – the Department of Treasury, Securities and Exchange Commission, Federal Trade Commission, Financial Crimes Enforcement Network and Internal Revenue Service – have different definitions of cryptocurrency.
In June 2015, New York became the first American state to regulate virtual currency companies. In 2017, the Federal Trade Commission approved LedgerX as the first federally regulated digital currency options exchange and clearinghouse in the US. Come 2019, over 30 states have introduced legislation that accepts using blockchain and Bitcoin. In a few states, it has already become law. They have also assigned task forces to understand the use of this technology for further use.
The US is on track to tightly regulate cryptocurrency with President Joe Biden’s move to add several new crypto reporting requirements in his 2022 budget.
Cryptocurrency laws in China
There is no outright ban on holding Bitcoin or other cryptocurrencies in China. That may be, in part, because China does not recognize cryptocurrency as a currency. In 2013, the People’s Bank of China (PBOC) defined Bitcoin as a special virtual commodity and not a currency. This was China’s first significant cryptocurrency-related statute. It reflected China’s acceptance of cryptocurrency, an unexpected win for the crypto market given the country’s stringent economic regulations.
In 2017, the PBOC declared that Initial Coin Offerings (ICO) – funding that uses cryptocurrency – are illegal. That caused Bitcoin’s value to decrease temporarily. The government then went on to amend China’s Civil Code in 2020. They noted that state-approved cryptocurrencies were only recognized as property to determine inheritances.
As of 2021, the government declared a ban on cryptocurrency mining across the country. Fearing disruption of economic order, environmental concerns and illegal activities, the country felt it best to put an end to mining. However, this doesn’t mean that China is rooting out cryptocurrency altogether. On the contrary, as per a report by the Institute of International Finance, the country’s government has expressed their support for a global regulatory framework for cryptocurrencies.
Cryptocurrency laws in India
Though the exchange of cryptocurrency is legal in India, using it as a tender is not. In April 2018, the Reserve Bank of India, India’s governing financial authority, declared that commercial and co-operative banks, payment banks, small finance banks and Non-Banking Financial Companies (NBFC) could neither deal in virtual currencies nor provide services to companies that do. One of the reasons for this was the revenue loss faced by the government due to cryptocurrency trading. On March 4th, 2020, the Supreme Court of India quashed this ban, turning their attention to Article 19 of the Indian Constitution. It states that people have the freedom to practice any profession or carry on any occupation, trade or business.
The country’s government is now considering a new bill – “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.” Additionally, they have amended the existing Companies Act of 2013. Following that, companies must disclose their investments in cryptocurrencies, including their profits and losses. This is in a bid to regulate cryptocurrency and avoid banning it.
While countries are skeptical about the validity of cryptocurrency, they are not dismissing it just yet. Governments understand the potential harms of allowing cryptocurrency trading, but they also acknowledge how it could benefit the country’s economy. That’s why instead of banning cryptocurrency outright, they are focusing on moderating it. In doing so, not only will they be able to protect their citizens but also pave the way for financial inclusion.
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