Indian Budget 2018 and all about cryptocurrencies!

India has been running the cryptocurrency errands too, along with the world. With Bitcoin making news all over the world in the past few months, the nation was expecting the government to provide some clarity on cryptocurrencies. The FM in Budget 2018 has said that the government does not consider cryptocurrencies a legal tender. The Indian government looks forward to taking measures against their use for illegal activities.

On the other hand, the government will be encouraging and adopting the use of blockchain technology underlying such cryptocurrencies for payment systems. The same can also be used in various other fields like insurance and banking.

The exact words of the FM are, “ Cryptocurrencies are no legal tender and the government discourages its use. However, the government will look at the utilization of Blockchain- a distributed digital technology that supports cryptocurrencies.”

Cryptocurrencies were in limelight last year with multi-fold returns. For instance, the most talked about bitcoin climbed to Rs 6,37,142 on January 31, 2018, from Rs 66,426 on February 1 last year, an 859 percent growth.

“Will take all measure to eliminate the use of crypto in financing illegitimate operations,” said the Finance Minister Arun Jaitley.

The conclusion stands to note that the government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payments system. Basically, nothing changes. The announcement just affects and aims to curb the use of these virtual currencies for illegal and illegitimate activities like terrorist financing.

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Consider a very important point put forth by Rashmi Deshpande, Associate Partner, Khaitan & Co, a leading law firm as she says, “The announcement on the cryptocurrency should not be misinterpreted. The intention is more likely to regulate the circulation to avoid its use for illegal transactions.”

This unsurprising declaration has been a long time coming over the past few months. The recent high number of Bitcoin transactions in the country has had both investors and the RBI worried. The finance ministry has in the past called cryptocurrency a Ponzi scheme, and the RBI has cautioned Indians to not engage in the trading frenzy as it lacks legitimacy and is unsafe for investors. Sebi and the Income Tax department, too, had voiced their concerns over the use of digital currencies, which are virtually untraceable and can be used to evade tax and fund illegal activities. Finally, the ultimate disclosure is out.

Exactly what the nation wanted to know.


Bitcoin, is it adoptive in UK?

Considering the UK to be a financial center globally, especially London, we might wonder that they are quite keen about bitcoin and other digital currencies. Digital currency is, after all, the ultimate example of a finance/technology hybrid. Well, you would be right.

However, anti-money laundering regulations should be updated to include Bitcoin and other virtual currencies, the UK Treasury has said. The Metropolitan Police says criminals are using cryptocurrency cash machines to launder money in London. The government’s aim is part of a broader update to the EU rules which are under negotiation. The update, revealed in Parliament last month, would mean that traders would no longer be able to operate anonymously.

The UK has laid down laws relating to cryptocurrencies for:

  • Consumer protection: FCA is the regulator with responsibility for ensuring that financial services are provided in a way that protects consumers and maintains the integrity of the market.
  • Prevention of money laundering: The prevention of money laundering is taken very seriously in the UK and indeed in many countries around the world.
  • Taxation: For once UK businesses were happy to have no regulation. We were told that VAT would most likely be charged on bitcoin service charges, but not bitcoin itself. Therefore an exchange would have to charge VAT on its commission, but not on the bitcoins traded.
  • Foreign regulations: Just because there is so little regulation in the UK, it doesn’t mean that UK businesses aren’t affected by foreign laws. Regulations in the US have a habit of reaching beyond the borders of the 50 states.

The lack of regulation in the UK has caused more problems than opportunities for bitcoin businesses. The biggest problem regarding bitcoin in the UK is– access to UK banking services. In short, there isn’t any. With the regulatory picture unclear, banks consider it too risky to offer bitcoin businesses a bank account.

In jurisdictions around the world, lawmakers and regulators are considering if and how to bring digital currencies under their regulatory frameworks.

Until the inevitable question of regulation is settled, one way or another, digital currency businesses will be unable reach their true potential.