Investments in cryptocurrency now prove to be one of the effective and efficient ways to make a place in the investment sector. With its rising popularity, certain concerns also arise. It is important to note down the interconnection between certain regulations from the government imposed upon cryptocurrencies and how it reflects in the investment sector. The analysis of various parameters associated with it needs to be examined carefully and must be understood properly. A basic level of understanding is very much important to negotiate the future problems that may arise in the sector. The decentralized working of cryptocurrency is its major characteristic and the main reason for its popularity. The absence of banks or other financial institutions in crypto dealings makes the process efficient and less problem free. But it is necessary to study the possibilities of various pros and cons associated with it. The primary parameter to study is to find and study how governmental interventions and regulations on the crypto investment sector should reflect in the stock price. The following article will introduce the possible changes and advantages and some of the negativities of these governmental regulations and their reflection on the crypto market.
Governmental regulations and their possible reflection on cryptocurrency prices in different countries
The transformation of cryptocurrency from speculative investment to the title of a new asset class attracted the attention of governmental agencies to it. The following are some of the recent cryptocurrency regulation that exists in some countries.
Different countries have adopted different approaches and developed different attitudes towards the crypto market. With the rising popularity in the investment sector, these regulations have also got some modifications. These modifications have got both positive and negative reflections on the crypto market. The tax on cryptocurrencies is also an important area that we need to look into.
The following are some of the crypto regulations in certain countries and their effects on the stock market.
India has a neutral approach to cryptocurrency. Its use is neither legalized nor penalized in India. The Indian government has imposed a thirty per cent tax on crypto investments and there is a tax deduction of one per cent at source (TDS) on crypto trades. The country has also been working on the launch of the digital rupee which is expected to launch in the 2022-2023 fiscal year.
A bill is in circulation regarding the banning of all private cryptocurrencies in India and it still needs to be approved. The question of whether to ban crypto or regulate it remains in India and this neutral approach of the Indian government.
America has witnessed further regulation on crypto in the year 2022. More power landed in the hands of existing market regulators like the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
The allegation against Ripple that it raised over 1. 3 billion dollars by selling its native token, XRP in an unregistered securities transaction and the widely publicized lawsuit that followed is one of the popular moves by these regulators that happened in the US in the year 2022. Crypto exchanges like Coinbase and Binance are targeted in the USA by these agencies, especially SEC. The USA has got a hard-core approach towards cryptocurrency and their strict regulations are making things hard for crypto investments. US Government is in its motion towards the launching of the digital US Dollar.
The Chinese government imposed strict rules on crypto exchanges. In China, Cryptocurrencies are classified as property to determine inheritances. China banned bitcoin mining in 2021 which gives a major strike to all crypto miners that forces them to stop the activity or move to another area with more favourable regulations. In September 2021, all cryptocurrencies were banned by the Chinese government. The People’s Bank of China bans all crypto exchanges in the country by imposing the allegations that they are facilitating public financing without governmental approval. But even amid these strict and harsh regulations, China has been working on developing Digital Yuan.
Though not legalized, every crypto exchange operating in the country must register with the government and in the UK, Cryptocurrencies are seen as property. There are no specific laws associated with cryptocurrency and its trading in the UK. Every crypto exchange must register with UK Financial Conduct Authority. The trading of crypto derivatives is strictly banned in the UK. The taxability of crypto trading in the UK is according to the activities undertaken and who engages in the transaction. The lower House of British Parliament recognized crypto assets as regulated financial instruments in October 2022.
Among many countries, it is Japan that has got more progressive approach towards crypto regulations. In Japan, Cryptocurrencies are recognized as legal property under the Payment Services Act (PSA). Crypto exchanges operating in the country are obligated to register with the Financial Services Agency (FSA) and must comply with AML/CFT obligations. In Japan, trading gains from cryptocurrencies are treated as “miscellaneous income” and investors are taxed accordingly.