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Crypto regulation is moving at a fast pace. In India, the RBI is still clamouring for banning bitcoin. However, this is not stopping innovation as some companies look for ways to adopt the web3 revolution. In this week’s rollup, we feature YearnDAO and how you can contribute to the web3 revolution. We also look at some regulatory developments in India, companies adopting web3 and news from around the world. Enjoy!
T. Rabi Sankar, deputy governor of the Reserve Bank of India, compared cryptocurrency to Ponzi schemes and said that banning — not regulating — them would be the “most advisable choice” for the Indian government. Sankar told audiences at a keynote address on Monday that “We have also seen that cryptocurrencies are not amenable to definition as a currency, asset or commodity.” Sankar feels that regulating crypto would ultimately be condoning its use as a store of value and even a currency in some cases. Merely regulating it could be akin to encouraging its use within the framework laid out by the government. However, he acknowledges that some people will still use crypto if it is banned, just as “drug trafficking is a rampant phenomenon despite a ban.”
We have known for a while now that central banks hate crypto. They’re afraid that growth and wide-spread use of crypto will curtail and limit their control over the manipulation of currency. Central banks of multiple countries have asked their government to ban crypto but they haven’t succeeded. India has the second-highest number of crypto users in the world and the adoption with its use cases makes it impossible to ban. The crypto bill is expected to be introduced some point this year and the entire crypto industry is watching this space closely.
Read more on what the RBI has to say, here .
Few weeks after rumours of them banning crypto, Russia is now moving to formally recognise crypto as currency. The central bank and finance ministry have come to some understanding and the new legislation is expected to be drawn up as early as 18th February. Russia’s regulation will seek to integrate a mechanism for the circulation of digital currencies into the country’s financial system while ensuring control over credit institutions’ cash flows.
As per the draft copy of the legislation, crypto’s use as currency will only be possible following proper identity checks via the country’s banking system or licensed intermediaries, while operations exceeding 600,000 rubles ($8,016) must be declared. Transacting outside those proposed legal parameters will be considered a criminal offense, and fines are expected to be introduced for the illegal acceptance of cryptos as a means of payment.Regulation, even if the terms are tough, are always beneficial for the long term growth of any activity. Read more on this, here .
BlackRock, a company that has $10 trillion in assets under management is looking to offer crypto trading services to its clients. The AUM of BlackRock is five times the entire crypto market cap. An exposure of even 1% of their AUM will cause a massive increase in crypto holdings across the board. Citing people familiar with the matter, CoinDesk informed that BlackRock aims to enter the digital asset space with “client support trading and then their own credit facility.” This will allow investors to borrow from the asset manager by providing cryptocurrencies as collateral. Read more on this massive development, here .
During the budget session, Nirmala Sitharaman announced that 1% TDS will be applicable on all crypto transactions. The exact method of how this will be applied was not stated. A number of industry experts have expressed concern over the impact this will have on trading volumes as it will not be feasible for traders to make multiple trades in a day.
For e.g., if a trader makes 10 transactions in a single day, 10% TDS will be deducted on the total value of transactions (1% on each transaction). This means that a cumulative profit of more than 10% for trading to be viable. Add to this the platform fees and GST. Presently day trading garners a profit of not more than 5% to even the best traders. With the cost of trading so high, industry experts are fearing that trading volume will drop significantly.
Read more on what the experts had to say, here.