Bitcoin prices soared almost by 9% to USD 42,400 on Wednesday evening, following the announcement of one of a kind executive order by the US President Biden.
The executive order titled “Ensuring Responsible Development of Digital Assets” issued directions to all the federal government agencies to produce their reports on digital currencies, and study about what are the risks and benefits associated with these digital assets.
The US market has seen an exploding growth in the cryptocurrency market and the authorities are in a hurry to study about the opportunities and the challenges these digitals assets may pose to the economy.
The order has directed the Treasury department and other related departments to prepare a report on the future of money and the role that the cryptocurrency will play in future.
The treasury department will evaluate the impact of Bitcoins on the financial stability and over the national security.
US government intervention for Crypto market regulation
The government has intervened to regulate the crypto market for the purpose of consumer safety, financial stability, illicit activity, US competitiveness, financial inclusion and for the purpose of responsible innovation.
A good mass of the population is invested in cryptocurrencies in US (around 16% of population or 40 million people)
Protection of the consumers have been an important directive of the order as there have been many cases where investors lost money because of crypto scams, through cyber attacks on exchanges or on them directly.
One of the major focuses of the authorities also remain on controlling the illicit activities and the threats that these digital assets might pose to the national security, as many cryptocurrency networks are deliberately created to make the identification of the transaction’s sources more difficult and more decentralized for the government agencies for the purpose of supporting any illegitimate activity.
The Biden administration is also keen in assessing & implementing policies related to cryptocurrencies so as to ensure sufficient safeguarding measures exist to avoid financial risks posed by these digital assets to the investors.
The executive order does not contain any information or directive related to imposition of any regulations on the cryptocurrencies or any other rules that crypto companies need to follow.
Quest for Digital Competitiveness & Leadership in US
The directives of signed executive order also focuses on giving US a competitive edge over other countries with reference to Crypto development and innovative activities.
The Department of commerce has been directed to establish a framework to drive US competitiveness and leadership and leveraging of digital asset technologies.
This move is an important move as China has put a complete ban on Cryptocurrencies at such a time when the global Crypto market size has reached around $2 trillion.
Such move of the Biden administration may offer opportunities to the US Crypto market to remain global leader in technological innovation for a long time, especially related to digital assets.
Digital Dollar out soon?
The administration is also keen in exploring a digital version of the dollar. The administration has not expressed its wish to launch a digital version of the dollar anytime soon nor has given its assent towards the launching of the same, it merely wants to get an urgent research and development done with reference to Central bank digital currencies (CBDC).
The Fed bank had undertaken this similar task last year to explore the potential issuance of a digital dollar and had released a detailed report specifying the pros and cons of such virtual money, but it is still yet to take any decision over this matter.
This unprecedented move by the US government gave a good stimulus to the slow-moving crypto market for a while as bitcoin surged above $42000 on Wednesday i.e., on 9th Mar’22.
Central Bank Digital Currency Issuance in India by 2023
In India too, the honourable Finance Minister in her 2022-23 Budget speech this year said that she expects the Reserve Bank of India to launch a central bank digital currency (CBDC) or digital rupee soon. This move will give a big boost to the digital economy in India.
It is expected that India’s official digital currency is likely to debut by early 2023 and the same will be a sovereign backed facility.
It is worth mentioning that in India there are around 100 million crypto owners, that is the highest number of crypto holders the world, which makes it one of the most important and rapidly growing crypto markets of the world with a size worth of around $5 Bn which is expected to reach $1.1 Trillion by 2023.
Taxation structure for Cryptocurrencies in India 2022
In the 2022-23 budget the honourable finance minister of India announced the proposal of declaring the cryptocurrencies, non-fungible tokens and other alike assets as Virtual Digital assets, that would be subjected to taxes in case of gains realized from their sales.
The government has proposed a new tax regime for taxing the gains on the cryptocurrencies at 30% on the profits made out of the sale of these digital assets. This tax of 30% shall also entail 1% in the form of TDS that will be collected and deposited by the exchanges on which this trade takes place.
This tax of 30% will apply on the receiver of the crypto gifts as well.
In case of loss arising from the sale of cryptocurrencies the same loss can be adjusted with the profits of other cryptocurrency but not with the income or gains from any other source, it cannot be carried forward to the subsequent years as well.