Digital assets gaining currency as regulators increase surveillance
Tuesday April 05 2022
Between 15 and 20 million people in India, Asia’s third-largest economy, own cryptocurrencies, according to industry body, the Blockchain and Crypto Assets Council. PHOTO | AFP
Global market capitalisation for digital assets has remained fairly stable in the past month, ranging from $2.05 billion on February 17 to $2.04 billion on March 24.
This is despite plans by the US and India, the world’s largest crypto markets, to increase regulations targeting the market, showing resilience of crypto assets, which may force countries to embrace rather than ban them.
India, which has about 100 million crypto users, the largest in the world, announced in February that it would impose 30 percent tax on gains from cryptocurrencies and non-fungible tokens as from April 1, in a bid to improve regulation of crypto trading rather than completely ban it as earlier speculated.
In the US, President Biden signed an executive order on March 9, tasking multiple federal agencies including the Internal Revenue Service and the Federal Bureau of Investigations, to develop a framework on “ensuring responsible development of digital assets.”
Knock-on effect
“The regulations that will result from this executive order are likely to change how crypto assets are traded, but it might take several months or years before the guidelines are rolled out,” Richard Levin, Chair of FinTech and Regulations Practice at American law firm, Nelson Mullins Riley and Scarborough, told The EastAfrican.
“The order is not meant to stir up fear among crypto traders or to reduce appetite for digital assets, but to protect citizens and traders and government interests in the rapidly developing and highly volatile market,” Mr Levin added.
The US, with about 27 million crypto users — the second largest globally, already has taxes on cryptocurrency gains, which, according to Mr Levin, has had insignificant effect on the crypto markets in the US.
“Being some of the largest crypto markets in the world, any regulations in US or India will be felt by crypto traders globally,” Mr Levin said.
Eric Michubu, a Bitcoin entrepreneur in Nairobi, told The EastAfrican, that despite the emerging regulations, digital assets remain attractive to investors.
“It is normal for cryptocurrency prices to bob up and down from time to time, just like stocks do.
‘‘But the resilience by traders is incentivised by higher gains in digital markets and to carry on trading,” Mr Michubu said.
This resilience of the crypto markets demonstrates International Monetary Fund’s warning that no single country can stop cryptocurrency on its own, but should instead consider regulations that monitor and mitigate risks posed to countries and citizens by the unregulated digital assets market.
Several countries have employed some regulations, including issuance or consideration of central bank digital currencies, in attempts to stabilise their fiat currencies and secure digital transactions for their citizens.