Addressing the US debt crisis: The role of crypto and regulatory clarity

Addressing the US debt crisis: The role of crypto and regulatory clarity

The US faces a debt crisis that threatens to undermine its economic stability and global leadership. The national debt has surpassed US$30 trillion, and interest payments are projected to become the largest expenditure by 2051, surpassing even Social Security.

The debt-to-GDP ratio is expected to rise to 136 per cent by 2028, a level that many economists consider unsustainable. The causes of this fiscal imbalance are manifold, but they include wars, recessions, tax cuts, pandemic relief, and infrastructure spending. The consequences could be dire, as the US could face higher borrowing costs, lower growth, reduced public investment, and diminished credibility.

In this context, the crypto industry offers a potential alternative to the traditional financial system, one that is more decentralised, transparent, and innovative. Crypto assets, such as Bitcoin and Ethereum, are powered by blockchain technology, which allows for peer-to-peer transactions without intermediaries.

Crypto platforms, such as Coinbase and Binance, provide users with access to a variety of digital assets and services, such as trading, lending, staking, and gaming. Crypto enthusiasts argue that crypto can empower individuals, foster innovation, and create new economic opportunities.

However, the crypto industry also faces significant challenges, especially in the US. The regulatory environment for crypto is unclear, inconsistent, and hostile. The Securities and Exchange Commission (SEC) has sued several crypto platforms, such as Coinbase and Binance, for allegedly operating illegally as brokers, exchanges, and clearing agencies without proper registration.

The SEC has also rejected numerous proposals for crypto exchange-traded funds (ETFs), which would provide investors with easier access to crypto assets. The SEC claims that it is protecting investors from fraud and manipulation, but many in the crypto industry accuse it of stifling innovation and creating uncertainty.

Coinbase, the largest crypto exchange in the US with over 100 million customers and billions of dollars in daily trading volume, has launched a campaign to bring regulatory clarity to the crypto industry in the US.

The campaign, dubbed “Stand With Crypto,” urges the 52 million Americans who own crypto to contact their government representatives and push for an overhaul of the financial system and a clear regulatory framework for digital assets.

Coinbase argues that the current “enforcement only” approach by the SEC is putting jobs, innovation, and global leadership at risk. Coinbase calls for legislation that allows fair rules for the road to be developed transparently and applied equally.

They are also expanding their presence in other jurisdictions that have more favourable regulations for crypto. Coinbase announced that it obtained registration with the Bank of Spain to act as a crypto exchange and custodian wallet provider.

This follows similar registrations in Germany and Ireland earlier this year. Coinbase said that it is “encouraged” by regulatory developments in the European Union and UK and will continue to invest in Europe and the UK. Coinbase hopes to offer its customers more products and services in these markets, such as crypto ETFs.

Coinbase is not alone in seeking regulatory clarity and diversification. Many other crypto platforms are looking outside the US for growth opportunities. For instance, Binance has established regional subsidiaries in Singapore, Australia, Jersey, Uganda, and Brazil. Kraken has applied for a banking license in Wyoming. Gemini has partnered with a UK bank to offer crypto savings accounts.

The US government should take note of these developments and reconsider its approach to crypto regulation. The US has the potential to be a leader in the crypto space, but it risks losing its competitive edge if it continues to stifle innovation and create uncertainty.

The US should embrace crypto as an opportunity rather than a threat and work with the industry to create a balanced and clear regulatory framework that protects investors while fostering innovation. The US should also address its debt crisis before it becomes too late and hard. Crypto could be part of the solution rather than part of the problem.

How crypto can help solve the debt crisis

Crypto can help solve the debt crisis in several ways. First, crypto can provide an alternative store of value and hedge against inflation. As the US government prints more money to finance its spending, the value of the dollar could decline, and inflation could rise.

This would erode the purchasing power of savers and investors and increase the cost of living. Crypto assets, such as Bitcoin, have a limited supply and are not controlled by any central authority. They can preserve their value and offer protection against currency devaluation and inflation.

Second, crypto can enable more efficient and inclusive financial services. The traditional financial system is plagued by high fees, slow transactions, intermediaries, and barriers to entry. Many people are unbanked or underbanked, meaning they lack access to basic financial services, such as savings, credit, and insurance.

Crypto platforms, such as Coinbase, Bybit and Binance, can offer low-cost, fast, and secure transactions without intermediaries. They can also provide access to a variety of digital assets and services, such as lending, staking, gaming, and NFTs. Crypto can empower individuals, especially those in developing countries or marginalised communities, to participate in the global economy and improve their financial well-being.

Third, crypto can foster innovation and growth. The crypto industry is one of the most dynamic and creative sectors in the world. It attracts talent, capital, and ideas from diverse backgrounds and disciplines.

It constantly experiments with new technologies, protocols, and applications. It creates new markets, products, and business models. Crypto can drive innovation and growth in other industries as well, such as energy, healthcare, education, and entertainment. Crypto can also generate tax revenues and jobs for the US government and economy.

Final thoughts

The US is facing a debt crisis that could have serious consequences for its economic stability and global leadership. The crypto industry offers a potential alternative to the traditional financial system, one that is more decentralised, transparent, and innovative.

However, the crypto industry also faces significant challenges in the US due to unclear, inconsistent, and hostile regulation. Coinbase has launched a campaign to bring regulatory clarity to the crypto industry in the US and has expanded its presence in other jurisdictions that have more favourable regulations for crypto.

The US government should take note of these developments and reconsider its approach to crypto regulation. The US should embrace crypto as an opportunity rather than a threat and work with the industry to create a balanced and clear regulatory framework that protects investors while fostering innovation.

The US should also address its debt crisis before it becomes too late and hard. Crypto could be part of the solution rather than part of the problem.

 

 

Source: https://e27.co/addressing-the-us-debt-crisis-the-role-of-crypto-and-regulatory-clarity-20231006/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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As India seeks firm footing on cryptocurrency, investors await clarity

As India seeks firm footing on cryptocurrency, investors await clarity

Almost two months after the government proposed a taxation policy for income from trading in virtual digital assets (VDAs), there is still a lack of clarity on various aspects, experts said.

According to Pratik Gauri, founder of 5ireChain, a blockchain ecosystem, the wavering clarifications and piecemeal developments indicate that the government is feeling its way through the subject of crypto regulation, and with little or no precedent to go by, it is trying to find a foothold in understanding the various challenges it will face in implementation once regulations are in place.

“One thing that I’ve repeated in the past and would like to re-emphasise is that the Reserve Bank of India (RBI) and the government are grappling with the reality that cryptocurrencies are not a fad and are here to stay,” said Gauri.
The government proposed in the Budget 2022 on February 1 that income from the transfer of any virtual digital asset be taxed at 30 percent. It said no deduction of any expenditure or allowance will be allowed while computing such income, except the cost of acquisition. It also proposed that a loss from the transfer of VDAs cannot be set off against any other income.

This week on March 21, the government clarified that losses from the transfer of virtual digital assets cannot be set off against gains from another. Neither can mining costs be treated as acquisition cost for tax deduction.

With no headway being made on a bill to regulate cryptocurrencies, it’s still not clear whether digital currencies are legal. Although investors say the tax provisions have effectively legalised crypto trading, Finance Minister Nirmala Sitharaman has said that taxing cryptocurrencies does not mean it has been legalised – that matter is still being considered.

Tracing VDAs

Taxation and legality issues apart, there are concerns over the enactment of certain provisions that show up in the finer details.

“From the perspective of crypto exchanges, the biggest challenge the many platforms will face is traceability of cryptocurrencies and VDAs,” said Gauri. “With the government putting the onus of this aspect on the exchanges, it’ll be a real challenge to balance innovation in the crypto world along with efforts to keep things private.”

Among the challenges in implementing the crypto tax provisions will be the monitoring of investor activity and preventing them from accessing more favourable crypto markets abroad. The crypto regulations that are in the offing and the severe tax incidence will be detrimental to the development of India’s crypto ecosystem, experts said.

“February 1, 2022, marked another day that the crypto industry and the crypto community would like to roll back,” said Raj Kapoor, founder of India Blockchain Alliance. “The community has taken strong exception to the government’s clarification on the taxation of cryptocurrencies as it is sure to have a stymieing impact. The lack of a provision to offset losses will drive away investors from KYC-compliant exchanges and will leave them literally with the devil’s alternative of accessing grey markets and offshore havens, completely defeating the very purpose of the tax.”

The proposed taxation measures will discourage retail investment in the emerging asset class because it denies them the benefit of setting off losses. Investors could cough up a heavy tax even if their trading activity suffers an overall loss.

Experts said there could be a flight of funds, restrained retail participation, and novel ways to circumvent these provisions, defeating the very purpose of taxing VDAs.

Aliasgar Merchant, developer relations engineer at Ignite, which works in the blockchain space, said the idea put forward by the government is tricky and does not take into consideration all aspects of crypto trading.

Instead of the offset regulation placing an unnecessary burden on the retail investor, a solution could be to have taxes based on exchanges and not individual VDAs, just as profit and loss are cumulatively treated for equity transactions across stock exchanges, Merchant said.

Looking for loopholes

“Another aspect totally overlooked by the Indian government is the presence of decentralised crypto exchanges as these platforms are out of the reach of government entities, making it difficult to audit and control transactions that take place through them. Such stringent laws which are heavily flawed will open doors to people looking for loopholes and may spark a move to decentralised crypto exchanges,” Merchant added.

Additionally, for those engaged in mining of VDAs, the government has clarified that all costs and investments towards equipment can’t be adjusted against any gains. Such expenses will be treated as a capital investment and only depreciation may be allowed to be claimed against them.

The measures may constrain India’s potential to develop into a global hub for crypto activity – in the way local information technology companies did – and extend use-cases of VDAs, experts said.

“While the Ministry of Finance works actively on regulating crypto, it’s crucial to understand that despite the various challenges, the industry holds immense potential,” said Raghav Gupta, founder of Equidei, which operates a decentralised finance platform.

Need for innovation

According to Gupta, it’s equally pertinent to incentivise innovation. Blockchain-based technology must be cultivated by providing developers ample space to grow so that India doesn’t miss the Web3 revolution.

Web3 refers to the next version of the internet where services run on blockchain and are decentralised.

Anndy Lian, Asia chairman of BigONE Exchange, a crypto trading platform, said it will be quite a task keeping track of VDAs.

“My question to the Indian government is: how are you going to account for each and every VDA? There are almost a few new coins every day in the market,” he said. “Assuming they bought 50 new coins each year, the effort for the investor to report tax and the regulators to monitor it would be a big issue. I urge the government to take progressive steps for crypto taxation. By doing so, you will see healthier trades and more foreign investments flowing into the country.”

All eyes will now be on the long-awaited cryptocurrency bill, although recent developments may be a reason for tempering hopes with caution.

Original Source: https://www.moneycontrol.com/news/business/cryptocurrency/as-india-seeks-firm-footing-on-cryptocurrency-investors-await-clarity-8273811.html

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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