By Reuters | Updated: 20 October 2021
A group of US lawmakers said Facebook cannot be trusted to manage cryptocurrency and urged the social media platform to discontinue immediately a small pilot of its cryptocurrency wallet named Novi, which was launched on Tuesday.
US Democratic senators Brian Schatz, Sherrod Brown, Richard Blumenthal, Elizabeth Warren, and Tina Smith voiced their opposition to Facebook’s two-year-old effort to launch a cryptocurrency and digital wallet.
“Facebook is once again pursuing digital currency plans on an aggressive timeline and has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape,” the senators wrote in a letter to Facebook Chief Executive Mark Zuckerberg.
“Facebook cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient,” the senators wrote.
The letter by the senators indicates that even Facebook’s small pilot of its cryptocurrency wallet will face scrutiny from lawmakers and regulators, who have previously raised antitrust and other concerns.
A Novi spokesperson said: “We look forward to responding to the committee’s letter.”
Facebook unveiled a cryptocurrency project in June 2019, as part of an effort to expand into e-commerce and global payments.
But the project immediately ran into fierce opposition from policymakers globally, who worried it could erode their control over the money system, enable crime, and harm users’ privacy.
In December, the project was rebranded in a renewed effort to gain regulatory approval, with its scope scaled back further to a single dollar-backed digital coin.
© Thomson Reuters 2021
Bitcoin Trading in India: No Proposal to Recognise Crypto, Says Finance Minister Nirmala Sitharaman
By Press Trust of India | Updated: 30 November 2021
The government has no proposal to recognise Bitcoin as a currency in the country, Finance Minister Nirmala Sitharaman told the Lok Sabha on Monday.
She also informed the House that the government does not collect data on Bitcoin transactions. Bitcoin price in India stood at Rs. 43.79 lakh as of 1:30pm IST on November 30.
Replying to a question on whether the government has any proposal to recognise Bitcoin as a currency in the country, the finance minister said, “No, sir”.
Bitcoin is a digital currency that allows people to buy goods and services and exchange money without involving banks, credit card issuers or other third parties.
It was introduced in 2008 by an unidentified group of programmers as a cryptocurrency as well as an electronic payment system.
It is reportedly the first decentralised digital currency where peer-to-peer transactions take place without any intermediary.
The government plans to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 in the winter session of Parliament which began on Monday.
The Bill seeks to ban all private cryptocurrencies but allows for some exceptions to promote the underlying technologies, while allowing an official digital currency by RBI.
In a separate reply to a written question, Minister of State for Finance Pankaj Chaudhary said the government has received a proposal from the RBI in October 2021 for amendment to the Reserve Bank of India Act, 1934 to enhance the scope of the definition of ”bank note” to include currency in digital form.
RBI has been examining use cases and working out a phased implementation strategy for introduction of Central Bank Digital Currency (CBDC) with little or no disruption, he said in reply to the question asked by Adoor Prakash.
Central Bank Digital Currency (CBDC) is introduced by a central bank.
Chaudhary said introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs and reduced settlement risk.
“Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option. There are also associated risks which need to be carefully evaluated against the potential benefits,” he said.
Replying to another question, Sitharaman said ministries and departments have spent Rs 2.29 lakh crore as capital expenditure during the April-September period of the current fiscal.
This is 41 percent of the Budget Estimate (BE) of Rs 5.54 lakh crore for 2021-22. The actual expenditure during current fiscal is about 38 per cent higher than the corresponding expenditure in FY 2020-21, she said.
To accelerate capital expenditure for creation and upgradation of infrastructure in the economy, the government had launched the National Infrastructure Pipeline (NIP) with projected infrastructure investment of Rs 111 lakh crore during the period 2020-2025 to provide world-class infrastructure across the country and improve the quality of life for all citizens.
National Monetization Pipeline (NMP) was also launched on August 23, 2021 to unlock the value of investments in public sector assets by tapping private sector capital and efficiencies for delivering infrastructure services, she said.
The monetisation proceeds are envisaged to be ploughed back to augment existing/ create greenfield infrastructure to boost the economy, she added.
Subsequently, she said, Gati Shakti (National Master Plan for Infrastructure Development) was launched on October 13, 2021 as a digital platform to bring ministries/departments together for integrated planning and coordinated implementation of infrastructure connectivity projects.
It will also facilitate the last-mile connectivity of infrastructure and reduce travel time for people, she noted.
On inflation, the finance minister said price situation of major essential commodities is being monitored by the government on a regular basis and corrective actions are taken from time to time.
“The uptrend in inflation has been largely led by exogenous factors viz. increased international prices of crude oil and edible oils which have an impact on domestic inflation due to India’s import dependence on these items,” she said.
The rise of wholesale price index (WPI) inflation is also mostly driven by ”fuel and power” and manufactured products inflation, once again driven by increased global prices of crude oil and increase in international commodity/input prices, she said.
Several supply side measures have been taken by the government to curb the inflationary pressures, the minister said.
To check fuel prices, Sitharaman said, the central government has reduced Central Excise Duty on petrol and diesel by Rs. 5 and Rs. 10 respectively with effect from November 4, 2021.
“In response many states governments have also reduced Value Added Tax on petrol and diesel. Consequently, retail prices of petrol and diesel have sobered down,” she said.
As an additional measure to control prices, India has agreed to release 5 million barrels of crude oil from its Strategic Petroleum Reserves, she said.
This release will happen in parallel and in consultation with other major global energy consumers including the US, China, Japan, and Korea.
Coinstore Cryptocurrency Exchange Enters India Despite Fear of Ban on Virtual Currencies
By Reuters | Updated: 29 November 2021
Singapore-based virtual currency exchange Coinstore has begun operations in India at a time when the Indian government is preparing legislation to effectively bar most private cryptocurrencies.
Coinstore has launched its Web and app platform and plans branches in Bangalore, New Delhi, and Mumbai which will act as its base in India for future expansion, its management said.
“With nearly a quarter of our total active users coming from India, it made sense for us to expand into the market,” Charles Tan, head of marketing at Coinstore told Reuters.
Asked why Coinstore was launching India despite the pending clampdown on cryptocurrencies, Tan said: “There have been policy flip-flops but we hope things are going to be positive and we are optimistic that the Indian government will come out with a healthy framework for cryptocurrencies.”
The New Delhi government is planning to discourage trading in cryptocurrencies by imposing hefty capital gains and other taxes, two sources told Reuters earlier this month.
It has said that it will allow only certain cryptocurrencies to promote the underlying technology and its uses, according to a legislative agenda for the winter session that is set to start later this month.
Tan said Coinstore plans to recruit about 100 employees in India and spend $20 million (roughly Rs. 150 crore) for marketing, hiring and development of crypto-related products and services for the Indian market.
Coinstore is the second global exchange to enter India in recent months, following in the footsteps of CrossTower which launched its local unit in September.
The price of the world’s biggest cryptocurrency, Bitcoin, has more than doubled since the start of this year, attracting hordes of Indian investors. Bitcoin price in India stood at Rs. 43.13 lakh as of 10am IST on November 29.
Industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around Rs. 40,000 crore.
Coinstore also plans to expand into Japan, Korea, Indonesian, and Vietnam, according to Tan.
Bitcoin Tumbles Over 9 Percent, Smaller Tokens Take a Hit as Coronavirus Variant Shakes Markets
By Reuters | Updated: 27 November 2021
Bitcoin tumbled over nine percent on Friday, dragging smaller tokens down, after the discovery of a new, potentially vaccine-resistant coronavirus variant saw investors dump riskier assets for the perceived safety of bonds, the yen and the dollar.
Bitcoin, the largest digital currency, fell as much as 9.2 percent to $53,551 (roughly Rs. 40,19,200), its lowest since October 10. The second largest cryptocurrency Ether fell over 13 percent to its lowest in a month as investors ditched cryptocurrencies.
Bitcoin, whose 13-year life has been peppered by bouts of extreme volatility, was on track for its biggest one-day drop since September 20. It has slumped by more than a fifth since hitting a record high of almost $70,000 (roughly Rs. 52,53,700) earlier this month.
Scientists said the coronavirus variant, detected in South Africa, Botswana and Hong Kong, has an unusual combination of mutations and may be able to evade immune responses or make it more transmissible.
“The spread of (the variant), especially to other countries, could wither investor appetite further,” said Yuya Hasegawa at Tokyo-based exchange Bitbank. “BTC’s upside will likely be limited and the market should brace for further loss.”
Bitcoin hit an all-time high of $69,000 (roughly Rs. 51,78,700) earlier this month as more large investors embraced cryptocurrencies, with many drawn to its purported inflation-resistant qualities.
Others have piled into the digital token on the promise of quick gains, a draw that has been heightened by record low or negative interest rates. Yet Bitcoin’s volatility has lingered, drawing questions over its suitability as a stable store of value.
Ether was last at $3,924 (roughly Rs. 2,94,500). It is down almost 20 percent from its record high hit on November 10.
© Thomson Reuters 2021
Crypto Bill: India Seeks to Block Most Cryptocurrencies, Create Framework for Official Digital Currency
By Reuters | Updated: 24 November 2021
India is looking to bar most private cryptocurrencies when it introduces a new bill to regulate virtual currencies in the winter session of Parliament, the government said late on Tuesday.
The government will allow only certain cryptocurrencies to promote the underlying technology and its uses, according to a legislative agenda for the winter session that is set to start later this month.
Through the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, India is also looking to make a framework for the official digital currency that will be issued by the Reserve Bank of India.
The central bank has voiced “serious concerns” about private cryptocurrencies and is set to launch its own digital currency by December.
Bitcoin, the world’s biggest cryptocurrency, is hovering around $60,000 (roughly Rs. 44.7 lakh), and its price has more than doubled since the start of this year, attracting hordes of local investors. Bitcoin price in India stood at Rs. 35.04 lakh as of 9am IST on November 24.
No official data is available but industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around Rs. 40,000 crore .
Earlier this year, India’s government considered criminalising the possession, issuance, mining, trading, and transference of crypto assets, but a bill was not introduced.
Since then, the government has changed its stance slightly and is now looking to discourage trading in cryptocurrencies by imposing hefty capital gains and other taxes, two sources told Reuters this month.
But a senior government official told Reuters that the plan is to ban private crypto assets ultimately while paving the way for a new Central Bank Digital Currency (CBDC)
Prime Minister Narendra Modi chaired a meeting to discuss the future of cryptocurrencies amid concerns that unregulated crypto markets could become avenues for money laundering and terror financing, sources told Reuters separately.
© Thomson Reuters 2021
El Salvador Plans First Tax-Free ‘Bitcoin City’, Backed by Bitcoin Bonds
By Reuters | Updated: 22 November 2021
El Salvador plans to build the world’s first “Bitcoin City”, funded initially by Bitcoin-backed bonds, President Nayib Bukele said on Saturday, doubling down on his bet to harness the cryptocurrency to fuel investment in the Central American country.
Speaking at an event closing a week-long promotion of Bitcoin in El Salvador, Bukele said the city planned in the eastern region of La Union would get geothermal power from a volcano and not levy any taxes except for value added tax (VAT). Bitcoin price in India stood at Rs. 46.84 lakh as of 10:30am IST on November 22.
“Invest here and make all the money you want,” Bukele said in English, dressed all in white and wearing a reversed baseball cap, in the beach resort of Mizata. “This is a fully ecological city that works and is energised by a volcano.”
Half of the VAT levied would be used to fund the bonds issued to build the city, and the other half would pay for services such as garbage collection, Bukele said, estimating the public infrastructure would cost around 300,000 Bitcoins.
El Salvador in September became the first country in the world to adopt Bitcoin as legal tender.
Although Bukele is a popular president, opinion polls show Salvadorans are skeptical about his love of Bitcoin, and its bumpy introduction has fueled protests against the government.
Likening his plan to cities founded by Alexander the Great, Bukele said Bitcoin City would be circular, with an airport, residential and commercial areas, and feature a central plaza designed to look like a bitcoin symbol from the air.
“If you want Bitcoin to spread over the world, we should build some Alexandrias,” said Bukele, a tech savvy 40-year-old who in September proclaimed himself “dictator” of El Salvador on Twitter in an apparent joke.
El Salvador planned to issue the initial bonds in 2022, Bukele said, suggesting it would be in 60 days time.
Samson Mow, chief strategy officer of blockchain technology provider Blockstream, told the gathering the first 10-year issue, known as the “volcano bond”, would be worth $1 billion, backed by Bitcoin and carrying a coupon of 6.5%. Half of the sum would go to buying Bitcoin on the market, he said. Other bonds would follow.
After a five year lock-up, El Salvador would start selling some of the Bitcoin used to fund the bond to give investors an “additional coupon”, Mow said, positing that the value of the cryptocurrency would continue to rise robustly.
“This is going to make El Salvador the financial centre of the world,” he said.
The bond would be issued on the “liquid network”, a Bitcoin sidechain network. To facilitate the process, El Salvador’s government is working on a securities law, and the first license to operate an exchange would go to Bitfinex, Mow said.
Crypto exchange Bitfinex was listed as the book runner for the bond on a presentation behind Mow.
Once 10 such bonds were issued, $5 billion (roughly Rs. 37,175 crore) in Bitcoin would be taken off the market for several years, Mow said. “And if you get 100 more countries to do these bonds, that’s half of Bitcoin’s market cap right there.”
The “game theory” on the bonds gave first issuer El Salvador an advantage, Mow argued, saying: “If Bitcoin at the five-year mark reaches $1 million (roughly Rs. 7.4 crore), which I think it will, they will sell Bitcoin in two quarters and recoup that $500 million (roughly Rs. 3,720 crore).”
© Thomson Reuters 2021
PM Modi Chairs Meet on Cryptocurrency, Concerns Said to Be Raised About Money Laundering, Terror Financing
By Press Trust of India | Updated: 15 November 2021
Amid concerns over misleading claims of huge returns on cryptocurrency investment, Prime Minister Narendra Modi on Saturday chaired a meeting on the way forward on the issue, with government sources asserting that such unregulated markets cannot be allowed to become avenues for “money laundering and terror financing”.
It was strongly felt in the meeting that attempts to mislead the youth through over-promising and non-transparent advertising should be stopped, the sources said, signalling that strong regulatory steps are in the offing.
“The government is cognisant of the fact that this is an evolving technology, it will keep a close watch and take proactive steps. There was consensus also that the steps taken in this field by the government will be progressive and forward looking,” a source said.
The government will continue to proactively engage with experts and other stakeholders, sources added, noting that since the issue cuts across geographical borders, it was felt that it will also require global partnerships and collective strategies.
The meeting on the way forward for cryptocurrency and related issues was a very comprehensive one.
“It was also an outcome of a consultative process as RBI, Finance Ministry, Home Ministry had done an elaborate exercise on it as well as consulted experts from across the country and the world. Global examples and best practices were also looked at,” the source said.
The RBI has repeatedly reiterated its strong views against cryptocurrencies saying they pose serious threats to the macroeconomic and financial stability of the country and also doubted the number of investors trading on them as well their claimed market value.
RBI Governor Shaktikanta Das on Wednesday had reiterated his views against allowing cryptocurrencies saying they are a serious threat to any financial system since they are unregulated by central banks.
His comments come ahead of the RBI’s internal panel report on the contentious topic which is expected next month.
The Supreme Court in early March 2020 had nullified the RBI circular banning cryptocurrencies.
Following this in February 5, 2021, the central bank had instituted an internal panel to suggest a model of central bank’s digital currency.
The RBI had announced its intent to come out with an official digital currency, in the face of proliferation of cryptocurrencies like Bitcoin about which the central bank has had many concerns.
Private digital currencies/virtual currencies/crypto currencies have gained popularity in the past one decade or so. Here, regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks.
It can be noted that on March 4, 2021, the Supreme Court had set aside an RBI circular of April 6, 2018, prohibiting banks and entities regulated by it from providing services in relation to virtual currencies.
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