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Bitcoin As a Legal Financial Instrument and Tender: How COVID-19 Is Changing Crypto Regulations


As the coronavirus crisis escalates, many enterprises are closing their shutters indefinitely which could very well lead them to bankruptcy. In this scenario, when the world is being forced to switch to a paperless economy, there are a few industries that seem to be taking the current turmoil in stride.


Fintech companies obviously view the Covid-19 pandemic as their time to shine, owing to the huge development potential that has opened up and their ability to organize remote work with minimal losses. Now contactless interaction is considered one of the major means of curtailing the rapid spread of the virus and helping the wheels of global trade get moving again somehow during quarantine. Thus, blockchain-based solutions, including digital banking and cryptocurrency payment systems, are becoming a focus of public attention. Unlike the equity markets, crypto is better at managing the repercussions of a “Black Thursday” type of drawdown, which has caused authorities around the world to start realizing that Bitcoin and other currencies like it could come in handy. Especially when the global recession is predicted to continue at least until late 2021 and activity in the traditional economy is expected to decline by almost 2% already this year.

The road to digitalization has been supported by the World Economic Forum (WEF) highlighting the importance of blockchain technology in the fight against supply chain disruption. As the supply processes are floundering due to their dependence on paper-based operations, the WEF is convinced that only governments with “strong digital infrastructure and digital regulations including e-signatures and e-transactions laws” are likely to successfully cope with the tough challenges presented by Covid-19. That is why there has been some good news related to crypto regulations coming in from all parts of the planet. Let’s review the novel regulatory reforms appearing in different countries to see how virtual assets are assisting us in the adjustment to our harsh new reality.

Asia


China


The first country to take the hit, China initiated an immediate disinfection of physical banknotes replacing them with new cash estimated at 600 billion yuan. The coronavirus-related concerns about contact payments have accelerated the development of the People’s Bank of China’s (PBoC) few-years-old project to issue its own digital currency. On April 4, the representatives of the bank claimed that they would pursue their commitment to establishing infrastructure for the virtual currency, notwithstanding the Covid-19 economic problems. Despite the fact that this was nearly the third time when Digital Currency Electronic Payment (DCEP) was mentioned during the annual National Currency Gold Silver and Security Work Conferences as an attempt to join trends within both local and global crypto spaces as well as to have stricter control over online financing, now the PBoC’s stance on the launch of digital yuan is even firmer than before. On March 24, the development of the national currency’s basic functions was completed and the bank has moved on to working out the relevant laws related to DCEP implementation. Now the digital yuan is already being trialed in four select, technically advanced Chinese cities – Chengdu, Shenzhen, Suzhou and Xiongan – via a pilot version of a special wallet app. Additionally, on April 15 one of the biggest state-owned commercial banks, the Agricultural Bank of China, was also revealed to have rolled out a beta-version of an application for the central bank’s digital currency.

India

Earlier in 2018 the world of crypto was disheartened due to the Reserve Bank of India’s (RBI) decision to ban any business activities that local banks can do with crypto-related companies, which immediately resulted in a steep drop in cryptocurrency prices. However, on March 10, 2020 India’s Supreme Court eliminated this initiative, citing the right of Indian citizens to practice any profession of their choosing and the disproportionality of the prohibition to the threat posed by cryptocurrencies. The lift of the ban has encouraged Indian crypto enterprises to reopen while the government is striving to figure out how to be in line with anti-money laundering and combating the financing of terrorism (AML/CFT) measures. Nischal Shetty, founder and CEO of the largest Indian cryptocurrency exchange WazirX, which was acquired by Binance, believes that the Supreme Court gave a significant impetus to mass adoption of virtual assets.


Within a month after the ban was reversed, WazirX has witnessed an impressive 470% growth in its daily trading volume. With pretty convenient banking channels currently open, people are more inclined to enter crypto as they don’t need to use peer-to-peer networks to circumvent the RBI’s restrictions anymore. In addition, in the middle of the Covid-19 pandemic the market volatility is leading to an influx of new players from India looking for easy profits. Read More...

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