By Reuters | Updated: 26 July 2022
It’s not all doom and gloom.
Even as the cryptocurrency sector shivers in the bleak winter, venture capitalists are pouring money into digital currency and blockchain startups at a pace that’s set to outstrip last year’s record.
In the first half of the year, VCs bet $17.5 billion (roughly Rs. 1,39,600 crore) on such firms, according to data from PitchBook. That puts investment on course to top the record $26.9 billion (roughly Rs. 2,14,630 crore) raised last year, a warmer and happier time for Bitcoin and co.
“The current market conditions – I don’t think they faze investors,” said Roderik van der Graf, founder of Hong Kong investment firm Lemniscap, which focuses on crypto and blockchain. “The capital available is massive.”
VC funds offer financing to young companies they believe have strong growth prospects. The data suggests a solid faith in the future of crypto and blockchain tech, despite a bruising six months for the industry.
A double whammy of macroeconomic headwinds and blow-ups at major projects this year have seen Bitcoin plummet about 65 percent from its November record of $69,000 (roughly Rs. 55 lakh), with the overall value of the crypto market tumbling by two-thirds to $1 trillion (roughly Rs. 79,79,600 crore).
Companies have shuddered as prices fall, with major US exchange Coinbase Global and NFT platform OpenSea among those to lay off hundreds of workers.
Yet some VCs are shrugging off the gloom, with many deploying substantial war chests as their faith in the underlying tech behind crypto coins remains strong.
Though not all investors are so bullish in the face of the crypto carnage, not by any means.
David Siemer, CEO of California crypto management firm Wave Financial, said there were signs of a pullback from the sky-high valuations of crypto firms last year.
“This will get a lot worse – we’re a couple of months into this cycle. In the last cycle the pain for those looking for funding was about 12 months.”
North America, long the hotspot for VC deals, has again been the focus of activity with about $11.4 billion (roughly Rs. 90,990 crore) in the six months to June, versus $15.6 billion (roughly Rs. 1,24,510 crore) for the whole of last year.
The numbers contrast with general VC activity in United States, where deals fell to $144.2 billion (roughly Rs. 11,50,950 crore) in the first half from $158.2 billion (roughly Rs. 12,62,700 crore) in the same period last year as macro conditions and market turmoil chill investment.
Rumi Morales, director of investments at Digital Currency Group, a major American VC, said the data reflected increasingly robust faith in the crypto and blockchain sector.
“There used to be existential risk being in the space – that the whole industry was just going to go away, it was all a dream. That is not the case anymore.”
Adoption of crypto as an investment tool mushroomed last year, with the use of blockchain also gaining ground – even if the revolutionary changes from the technology promised to industries such as finance and commodities remain elusive.
Among the mega US crypto deals in 2022: $400 million raised by the US arm of crypto exchange FTX in January; a $450 million (roughly Rs. 3,600 crore) fundraising round by blockchain developer ConsenSys in March; and $400 million (roughly Rs. 3,200 crore) raised by stablecoin issuer Circle a month later.
Activity is strong in Europe too, with $2.2 billion (roughly Rs. 17,560 crore) of VC investment in the first half of the year.
Lisbon-based Fedi, an app designed to help people receive, hold and spend Bitcoin, said this month it had raised $4.2 million (roughly Rs. 30 crore) in seed financing.
“Within seven days we had all of the investment commitments,” Obi Nwosu, one of its founders, told Reuters. “And within less than a month and a half we had the initial fundraise target in the bank. Done.”
© Thomson Reuters 2022
Crypto Reporting Framework Discussed During G20, Decision Taken on Swift Implementation
By Press Trust of India | Updated: 9 September 2023
The G-20 leaders on Saturday decided on swift implementation of the reporting framework for crypto assets, saying a significant number of member nations want information exchange on such non-financial assets to start by 2027.
The Crypto Asset Reporting Framework (CARF) or template is being developed to make sure that such non-financial assets are not used by tax evaders to conceal their unaccounted wealth.
“We call for the swift implementation of the CryptoAsset Reporting Framework (“CARF”) and amendments to the CRS. We ask the Global Forum on Transparency and Exchange of Information for Tax Purposes to identify an appropriate and coordinated timeline to commence exchanges by relevant jurisdictions,” said the G20 Leaders’ declaration, which was adopted by consensus.
The leaders of 20 developing and developed nations have reaffirmed the commitment to continue cooperation towards a globally fair, sustainable and modern international tax system appropriate to the needs of the 21st century.
“We remain committed to the swift implementation of the two-pillar international tax package. Significant progress has been made on Pillar One including the delivery of a text of a Multilateral Convention (MLC), and work on Amount B (framework for simplified and streamlined application of the arm’s length principle to in-country baseline marketing and distribution activities) as well as the completion of the work on the development of the Subject to Tax Rule (STTR) under Pillar Two,” the declaration said.
Briefing reporters after the summit, Finance Minister Nirmala Sitharaman said the G20 countries have made substantial progress on the two-pillar solution.
“Work has happened on exchange of information on immovable property transactions between countries. There is a launch of the pilot programme of the South Asia academy for tax and financial crime investigation in collaboration with the OECD,” Sitharaman said.
Under the global tax deal, about 140 countries, including India, have agreed to an overhaul of global tax norms to ensure that multinationals pay taxes wherever they operate and at a minimum of 15 percent rate. However, some vexed issues still need to be ironed out before its implementation.
The G20 countries called on the OECD to develop an inclusive framework to swiftly resolve the few pending issues relating to the MLC (multilateral convention) with a view to preparing the MLC for signature in the second half of 2023 and completing the work on Amount B by the end of 2023.
“We welcome the steps taken by various countries to implement the Global Anti-Base Erosion (GloBE) Rules as a common approach. We recognise the need for coordinated efforts towards capacity building to implement the two-pillar international tax package effectively and, in particular, welcome a plan for additional support and technical assistance for developing countries,” the declaration said.
The G20 countries also took note of the OECD report on ‘Enhancing International Tax Transparency on Real Estate’ and the ‘Global Forum Report on Facilitating the Use of Tax-Treaty-Exchanged Information for Non-Tax Purposes’.
The OECD has suggested automatic exchange with regard to information on real estate assets among countries and the setting up of digitalised ownership registers accessible to designated relevant government agencies on a real-time basis amid concerns over investments in foreign real estate being used to “shelter undeclared assets”.
The report noted that there has been a significant increase in foreign-owned real estate assets over the past decade, and a lot of funds have been shifted from financial assets to buying foreign real assets.
The Global Forum report also called for countries to adopt a ‘whole-of-government’ approach to address the challenge of illicit financial flows through the sharing of information from tax authorities to non-tax agencies, like financial intelligence units, anti-corruption agencies, customs authorities and public prosecutors.
India had been pressing for expanding the scope of common reporting standard (CRS) at the G20 to include non-financial assets like real estate properties, under the automatic exchange of information (AEOI) among OECD countries.
IMF-FSB, Regulators Set Out Roadmap to Coordinate Global Cooperation on Crypto Asset Regulation
By Reuters | Updated: 8 September 2023
Global financial regulators and the International Monetary Fund on Thursday set out a roadmap to coordinate measures that stop crypto assets from undermining macroeconomic and financial stability. Such risks are exacerbated by noncompliance with existing laws in some instances, the G20’s risk watchdog, the Financial Stability Board, and the IMF said in a paper.
Many of the claimed benefits from crypto assets, such as cheaper and faster cross-border payments, and increased financial inclusion, have yet to materialise, it added.
“Widespread adoption of crypto-assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks, divert resources available for financing the real economy, and threaten global financial stability,” the paper said.
The paper sets out timelines for members of the IMF and G20 to implement recent recommendations to regulate crypto from the Financial Stability Board and IOSCO, a global group of securities regulators.
It marks a further evolution in regulatory thinking after several years of seeing little threat from the sector, with attitudes hardening after the collapse of the crypto exchange FTX last November, which rattled markets and left investors nursing losses.
“A comprehensive policy and regulatory response for crypto-assets is necessary to address the risks of crypto-assets to macroeconomic and financial stability,” said the paper, which will be presented to G20 leaders at a summit this month in New Delhi.
The European Union has approved the world’s first comprehensive set of rules for crypto assets, but there is a patchier approach elsewhere to a borderless sector where fraud and manipulation are “prevalent”.
Other elements include governments avoiding large deficits which can lead to inflation that dents fiat currencies and encourages substitutes such as cryptoassets, the paper said.
The tax treatment of crypto assets should also be spelled out, along with how existing laws apply to the sector.
© Thomson Reuters 2023
Cathie Wood’s Ark Invest and 21Shares File for First Spot-Ether ETF in the US: Details
By Reuters | Updated: 7 September 2023
Cathie Wood’s Ark Invest and crypto investment firm 21Shares are seeking regulatory approval to set up an exchange-traded fund (ETF) that would directly hold ether, according to a filing with the US Securities and Exchange Commission (SEC) on Wednesday.
It is the first attempt to list a fund in the US that would directly invest in ether, the second-largest cryptocurrency by market capitalization.
In a boost to the crypto sector, the US District of Columbia Court of Appeals last month passed a landmark ruling that the SEC was wrong to reject an application from crypto asset manager Grayscale Investments to list an ETF that tracks the price of bitcoin.
The case has been closely watched by the cryptocurrency and asset management industries, which have been trying for years to convince the SEC to approve a spot bitcoin ETF.
Cboe Global Markets earlier this year filed a proposal with the US SEC to list and trade shares of a spot bitcoin ETF by Ark Invest and 21Shares on the Cboe BZX exchange. The SEC, however, delayed a decision on whether to approve it.
The regulator has in recent years rejected dozens of applications for spot bitcoin ETFs, citing inadequate levels of trading surveillance that could leave the underlying spot market subject to fraud and manipulation.
© Thomson Reuters 2023
Talks Underway for Global Framework on Crypto Rules, Says FM Nirmala Sitharaman
By Reuters | Updated: 6 September 2023
Discussions are underway on a global framework to regulate crypto assets, India’s finance minister said on Tuesday, adding that cryptocurrencies could not be regulated efficiently without the cooperation of all countries.
“India’s (G20) presidency has put on the table key issues related to regulating or understanding that there should be a framework for handling issues related to crypto assets,” Nirmala Sitharaman said at an event in the financial capital of Mumbai.
“Active discussions are happening.”
Back in March, the Indian government said that its money laundering laws would apply to trade in cryptocurrencies.
The exchange between virtual digital assets and fiat currencies, the exchange between one or more forms of virtual digital assets, and the transfer of digital assets will be covered under money laundering laws, the notification released at the time said.
India is yet to finalise legislation and regulations surrounding cryptocurrencies even as the country’s central bank has cautioned against their use multiple times. The Reserve Bank of India has said that cryptocurrencies should be banned as they are akin to a Ponzi scheme.
G20 president India’s push to regulate cryptocurrencies gained support from both the International Monetary Fund and the United States in February.
India had said it wanted a collective global effort to deal with problems posed by cryptocurrencies such as bitcoin, and the finance ministry had said it had held a seminar for G20 member states to discuss how to come up with a common framework.
In February, Sitharaman and US Treasury Secretary Janet Yellen had discussed strengthening multilateral development banks, global debt vulnerabilities, and crypto assets on the sidelines of the G20 finance chiefs meeting.
© Thomson Reuters 2023
SBI Introduces UPI Interoperability With eRupee CBDC for Seamless Transactions
By ANI | Updated: 4 September 2023
The State Bank of India (SBI) has announced the implementation of Unified Payments Interface (UPI) interoperability with the Digital Rupee, also called as Central Bank Digital Currency (CBDC).
With this move, SBI aims to deliver convenience and accessibility to its customers. This feature, accessible through the ‘eRupee by SBI’ application will empower users to effortlessly scan any merchant UPI QR code for transactions.
SBI was among the first few banks to participate in the RBI’s retail digital e-rupee project.
Unified Payments Interface (UPI) is India’s mobile-based fast payment system, which facilitates customers to make round-the-clock payments instantly, using a Virtual Payment Address (VPA) created by the customer. UPI payment system has become hugely popular for retail digital payments in India, and its adoption is increasing at a rapid pace.
“The seamless integration of CBDC with UPI marks a significant leap for the bank, enhancing the acceptance and utilization of digital currencies in everyday transactions,” said SBI in a release. “Bank feels that this integration will be a game changer for the digital currency ecosystem.”
“By bridging the gap between CBDC and the extensively used UPI platform, SBI aims to revolutionize payments made in India. With this move in the realm of digital payments, the future of CBDC integration appears promising,” it added.
The digital rupee, also called as Central Bank Digital Currency (CBDC), was launched by the Reserve Bank of India on a pilot basis on December 1, 2022. In the Union Budget 2022-23, Finance Minister Nirmala Sitharaman announced about rolling out of the digital currency called Central Bank Digital Currency (CBDC).
CBDCs are an electronic form of a sovereign currency. As is the case with cash, it will not earn any interest but can be converted to other forms of money, like deposits with banks.
Terrorists Using Cryptocurrency, Metaverse; Need Global Cooperation on Cybercrime: PM Modi
By Press Trust of India | Updated: 4 September 2023
Terrorist organisations are using technology for radicalisation and capitalising on emerging digital avenues such as the dark net, metaverse and cryptocurrency platforms, Prime Minister Narendra Modi has said while seeking global cooperation to deal with cybercrimes.
In an exclusive interview with PTI, he said the World Bank has estimated that cyber-attacks could have caused losses of around $5.2 trillion (roughly Rs. 4,30,00,000 crore) to the world during 2019-2023, but their impact goes beyond just financial aspects into activities that are deeply worrying.
He said these can have social and geopolitical implications.
“Cyber terrorism, online radicalisation, use of networked platforms to move funds from money laundering to drugs and terrorism – are just the tip of the iceberg,” he said.
Modi said cyberspace has introduced an entirely new dimension to the battle against illicit financial activities and terrorism.
“Terrorist organisations are using technology for radicalisation, moving money from money laundering and drugs into terror funding, and capitalising on emerging digital avenues such as the dark net, metaverse, and cryptocurrency platforms to fulfil their nefarious aims,” he said.
Stressing the need for taking the cyber threats very seriously, the prime minister said one angle of their adverse impact is the financial losses they cause.
Further, he said, cyber-attacks can also have implications for the social fabric of nations.
PM Modi said the spread of ‘deep fakes’ can cause chaos and loss of credibility of news sources. He said fake news and ‘deep fakes’ can be used to fuel social unrest.
“So, it is of concern to every group, every nation, and every family. That is why we have taken this up as a priority,” he said.
The prime minister noted that India hosted a G20 Conference on Crime and Security in the Age of NFTs (Non-Fungible Tokens), Artificial Intelligence and Metaverse in July in Gurugram.
During this conference, he said, concern was expressed over malicious cyber activities contrary to established norms, principles and rules of cyberspace and international law.
Modi said it was stressed that coordination on prevention and mitigation strategies is needed and emphasis was placed on the need to achieve a comprehensive international convention on countering the use of ICTs (Information and Communications Technologies) for criminal purposes.
He said there may be many domains in which global cooperation is desirable but in the domain of cyber security, global cooperation is not only desirable but is inevitable.
“Because the threat dynamics are distributed – handlers are somewhere, assets are somewhere else, they are speaking through servers hosted in a third place, and their funding could come from a completely different region. Unless all the nations in the chain cooperate, very little is possible,” he said.
Speaking at the G20 conference in July, Union Home Minister Amit Shah had warned the global community about security challenges that have evolved from “dynamite to metaverse” and “hawala to cryptocurrency” and asked G20 member countries to rise above conventional boundaries and share information on a real-time basis to check all crimes in the cyberspace.
Shah had underlined the threats emanating from cyber criminals using darknet, metaverse, deepfakes, ransomware and toolkit-based misinformation campaigns and strategic targeting of critical information and financial systems.
According to the data given in Parliament on December 13, 2022, over 16 lakh cybercrime incidents had been reported in India in the three-year period beginning 2019 following which more than 32,000 FIRs were registered.
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