After a turbulent year for cryptocurrencies, 2023 may see a move towards regulatory standards


By Bunty Thoridingjam |
December 31, 2022 9:20 PM ist

New Delhi [India]Dec 31 (ANI): Despite India taking steps towards launching digital currency with components based on blockchain technology, the scenario regarding cryptocurrency continues to be debated with the RBI noting the risks of private cryptocurrencies and has not yet moved for its regulation.
The dramatic collapse of the FTX trading platform added to concerns, but there are people who feel that disruptions to the crypto market do not take away from the inherent value of blockchain and that such products give end-users control over their assets. transactions. Blockchain technology allows the existence of cryptocurrencies.
Reserve Bank of India has been outspoken about its views on cryptocurrencies and its governor Shaktikanta Das said earlier this month that cryptocurrencies should be “banned” and that if they are allowed to grow, the “next financial crisis” will come from private cryptocurrencies.
He said that they have absolutely no underlying and that it is a speculative activity.
“I still hold the view that it should be banned. Countries have had different views, but our opinion is that it should be banned. If you try to regulate it and allow it to grow, mark my words, the next financial crisis will come from private cryptocurrencies.” Das said.
He mentioned three key points of concern regarding cryptocurrencies.
“I would like to mention three points. One, the origin of cryptocurrencies, private cryptocurrencies is to circumvent the system, break the system. They don’t believe in central bank currency, they don’t believe in the regulated financial world. They want to circumvent and beat the system “Second, they have absolutely no foundation. Not only that, I have yet to hear any credible argument as to what public good or public purpose it serves. There is still no clarity on that. Third, it is 100 percent speculative activity.” Das said during a BFSI information summit organized by a business publication.
Das also said that cryptocurrencies have certain inherent risks to macroeconomic and financial stability.
“We have been pointing it out and its developments for the last year, including the last episode that was built around FTX. We need not say anything more about our support. Time has shown that cryptocurrencies are worth what they are today,” he added.
Das cited some estimates that the total value of cryptocurrencies was around $180 billion and has now dropped to around $140 billion, essentially meaning around $40 billion in value was wiped out.
Crypto assets are currently not regulated in India.
The government does not register crypto exchanges and has suggested that crypto assets, by definition, have no borders and require “international collaboration.”
The government believes that any legislation to regulate or ban can be effective only with significant international collaboration in assessing the risks and benefits and the evolution of taxonomy and common standards.
Cryptocurrency involves risk and volatility, but the market has attracted traders and investors looking for quick profits.
FTX was a high-profile crypto exchange and it crashed in November due to misappropriation of client funds. Earlier in the year, cryptocurrency hedge fund Three Arrows Capital (3AC) went into liquidation and developments hurt the cryptocurrency industry.
FTX’s collapse left a million creditors around the world with funds locked up on the exchange or lost in the revolving doors of fund transfers between FTX and its trading arm Alameda Research.
Crypto industry experts feel that the growing adoption of digital payments and the growing adoption of blockchain technology are converging with the underlying concept of cryptocurrency.
Neel Kukreti, trader and founder of Crypto Jargon, said that cryptocurrency has come a long way, but still has a long way to go in terms of widespread adoption and usage.
Finance Minister Nirmala Sitharaman in the 2022 Union Budget announced that “any income from the transfer of any virtual digital assets will be taxed at a rate of 30 percent.” The government had intended to introduce a cryptocurrency bill, but it was postponed because it wanted broader consultations.
The Reserve Bank of India has also started to embrace blockchain technology, as evidenced by its recent Central Bank Digital Currency (CBDC) pilot program.
Kukreti said that the digital rupee is a good concept on its own, but it does nothing to promote the adoption of traditional cryptocurrency assets.
He said that most digital currencies were still in their infancy and subject to heavy speculation.
“Even Bitcoin, the oldest and most well-known cryptocurrency, was very volatile. Only commodity-recognized cryptocurrencies are likely to survive,” he said.
Nadeem Khan, a trader who has been investing in cryptocurrency for eight or nine years, said the launch of his own digital rupee in India is a big step towards large-scale adoption of cryptocurrency in the country, adding that there is a long way to go.
He said that blockchain as a technology will have a bigger impact than is seen at the moment. “After all, it is a ledger. In the near future, we could see many more applications. There are many new and innovative applications being developed on the blockchain that could provide benefits in many industries. People are also starting to realize realized that blockchain could be much more than just a digital currency.”
He said that 2022 showed how volatile the crypto market can be and it is important to do your own research.
“One of the most common sayings in the cryptocurrency space is Do Your Own Research (DYOR),” he said, adding that there is also a lot of free content online that could give you a basic idea about cryptocurrency.
Disagreeing with the RBI Governor’s views on the risks posed by private cryptocurrencies, he said they can “pose a threat to the current financial system when allowed to be used in parallel as a country’s legal tender.”
Kukreti said that before making any investment decisions, it is important to consider one’s goals for cryptocurrencies.
He said that if a person is a long-term investor, it may be safer to stick with a particular cryptocurrency and for those interested in the technological aspects of blockchain, the choice could be different.
“If you are simply looking to speculate and make quick profits, the current market may not be conducive to that. Wait for the bull market to return,” he said.
Crypto seemed cut off from the financial system before the pandemic. Experts believe that for individual or institutional investors who hold both crypto and traditional financial assets or liabilities, any large loss in crypto can lead them to rebalance their portfolios.
This, in turn, will likely lead to volatility in financial markets or even default on traditional liabilities.
The growing adoption of cryptocurrencies by retail and institutional investors in Asia, many of whom hold positions in both the equity and cryptocurrency markets, is also one factor in this interconnectedness, the expert said.
Even seasoned investors in the crypto sphere seem to have taken a wait-and-see approach due to the series of crashes that occurred in 2022 and the cautious stance taken by the Reserve Bank of India.
Marc Despallieres, director of strategy and trading at Vantage, said that it is virtually impossible to predict the direction that cryptocurrency prices will take in 2023.
“However, there are a couple of factors that will definitely impact valuations. The first is interest rates. Rate hikes could continue to keep prices low. The other factor is the expected fallout from the FTX bankruptcy. “There is likely to be a greater degree of government scrutiny and regulation. While this could be a good thing in the long run, it may negatively affect prices in 2023,” he said.
Despallieres said that investors active in the sector remain concerned “because there is a lot of uncertainty in the decentralized market.”
He said the lingering mistrust may come to an end with the expected start of regulations at the G20 leadership of India.
“The most crucial goal to survive during economic downturns is to maintain the value of an asset. Certainly, the value of cryptocurrencies can be threatened by their volatility. But these moves also illustrate people’s optimism and faith in the market decentralized. Cryptocurrencies are still young assets in terms of people’s perception, but their potential can significantly impact the entire financial industry,” he said.
Crypto investors will hope that next year will see some progress in the direction of its regulation. (AND ME)


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