JOIN USExplained: How are cryptocurrencies regulated in countries around the world?
The parliament's winter session has listed the introduction of The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, starting November 29.
The bill seeks to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India. It also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses, according to a report by The Indian Express.
Though they remained largely unaffected in the global markets following the news, prices on local exchanges crumbled down.
The regulation of cryptocurrencies can differ from one country to another. While the US and EU have been proactive in pinning down the regulations, India stands somewhere in between, still trying to figure out the best way to regulate the currency.
Canada defines a virtual currency as a digital representation of value that can be used for payment or investment purposes that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds, based on its Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations.
It also defines it as a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to in paragraph.
The United States, while, has different regulations and definitions based on the state. Though cryptocurrencies are not recognised by the federal government as legal tender, different states, recognise the virtual currencies based on their definitions.
The United Kingdom, though do not consider crypto assets as any form of currency or money, states that they still have a unique identity of their own which makes it hard to be compared with other forms of investment activity or payment mechanism.
Virtual currencies are classified as "units of account" and hence "financial instruments" in Germany, according to the Financial Supervisory Authority. Bitcoin is classified as a crypto token by the Bundesbank because it does not perform the functions of a currency. Citizens and legal companies, on the other hand, can acquire and sell crypto assets if they do so through exchanges and custodians licenced by the German Federal Financial Supervisory Authority.
Even though cryptocurrency is not recognised as a legal tender by most countries, the value these currencies represent is recognised. They also indicate their function as a medium of exchange, a unit of account or a store of value. And like India, many countries have taken steps to launch their own digital currencies that are backed by the central bank.
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