India to [Finally] Draft Cryptocurrency Regulations in December: Report

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After years of ambiguity, the Indian government might, at last, reveal a regulatory draft for the cryptocurrency sector in the country before the turn of the year.

A panel tasked by India’s finance ministry to regulatory norms and guidelines for domestic cryptocurrency trading and the blockchain industry is set lay bare its draft next month, according to a Quartz report on Tuesday,

The notable development came to light in a counter-affidavit filed by India’ ruling government in a Supreme Court case which currently sees India’s domestic cryptocurrency exchange industry challenging the banking ban enforced by the central bank earlier this year.

An excerpt from the government’s counter-affidavit reads:

[S]erious efforts are going on for preparation of the draft report and the draft bill on virtual currencies, use of distributed ledger technology in (the) financial system and framework for digital currency in India.

The affidavit goes on to reveal that the draft bill and report will be forwarded to members of the finance ministry’s inter-ministerial committee. Subsequently, the committee will hold a meeting on the drafts which will be made available to its members sometime in December.

First established in early 2017, the country’s finance ministry formed an inter-governmental committee that was tasked to examine global regulatory and legal frameworks for cryptocurrencies. The committee, which includes India’s taxation, budget and economic affairs ministries as well as central bank representatives, has the mandate of suggesting measures to propose a regulatory framework for cryptocurrencies – both in usage and trading – in India.

Chaired by Subash Chandra Garg, the head of the committee and secretary of the Department of Economic Affairs, the panel’s approach to regulation will be revealed at a time when the government is considering a ban on the use of private cryptocurrencies In India.

In a televised interview in June, Garg hinted that the committee had “moved quite a lot” in drafting the regulations despite repeatedly missing deadlines on revealing the drafts.

An ongoing ban enforced by the central bank barring banks from providing services to cryptocurrency exchanges has largely chocked the industry in India. It was no longer “reasonable” to continue operations as a crypto exchange, major trading platform Zebpay said in September while ending its operations before headling to friendlier shores in Malta.

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KPMG: Cryptocurrency Still Far Away From a Store of Value

When Moon? Not soon according to the talking heads at KPMG. Bitcoin and other cryptocurrencies will require a bit more time before they truly function as a reliable store-of-value.


We Ain’t There Yet, Says KPMG

Whereas in August, KPMG reported that the blockchain industry was maturing and moving beyond experimentation, the latest study authored by KPMG, says Bitcoin and other cryptocurrencies will require a bit more time before they truly function as a reliable store-of-value.

The report, titled Institutionalization of Crypto-assets determined that Bitcoin and other digital assets are not useful as a medium of exchange or store of value due to a lack of trust in digital assets, rampant volatility, and scalability issues.

The report also suggests that cryptocurrency must be reformed by institutionalization in order to thrive in the future and KPMG chief economist Constance Hunter explained that “more participation from the broader financial services ecosystem will help to drive trust and scale for the tokenized economy.”

KPMG believes that large-scale involvement from banks, payments institutions, FinTech companies, and exchanges are exactly what the crypto-sector requires to better integrate into the current global financial system.

Buy the Rumor, Sell the News

At the moment, many analysts and researchers believe that they crypto-market is primarily propelled by speculative investment from small investors who either select startups based on the potential of their technology or simply because they believe that the digital assets with eventually appreciate in value.

KPMG

KPMG does not discount the necessity of retail investors to the sector but also points out that the industry’s failure to comply with existing regulations and the need for a unique set of new regulations that recognize the unique characteristics of digital assets are needed before cryptocurrencies can mainstream and become a real store of value.

Basically, KPMG issued the same guidance that many others suggest, which boils down to crypto startups needing to either adjust their business model to comply with current regulations or do a better job defining and representing their products in the eyes of financial regulators.

Only Time will Tell

Coinbase was also a contributor to the report and added that as the cryptocurrency market matures it will slowly undergo a metamorphosis that transforms the market from a space driven by retail speculators to a place frequented by the world’s premier financial institutions.

Through a bit of shameless self-promotion, Coinbase also dropped a hint that it had already designed and launched the platforms and services that institutional investors require to invest in the crypto-sector.

Fortunately, the KPMG ended the report on a positive note by concluding that the advent and dominance of crypto assets will eventually occur. The authors perceive the current challenges facing the crypto sector as merely transitional growing pains and KPMG suggests that cryptocurrencies will reign supreme once issues like taxation, regulatory compliance, security, financial auditing and liquidity are properly addressed.

Do you think institutional investment is the only way for the cryptocurrency market to escape its current malaise? Share your thoughts in the comments below!


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KPMG: Cryptocurrencies like Bitcoin are Not Store of Value [Yet]

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It will take a long time for cryptocurrencies like Bitcoin to attain the status of a store-of-value asset, said KPMG in its latest crypto study.

The Big Four firm’s “Institutionalization of Cryptoassets” report asserted that assets like bitcoin could neither be used as a medium of exchange nor a store of value, mainly because of lack of trust and scalability. It suggested that crypto sector must undergo institutionalization if it plans to thrive any further concerning stability and adoption.

“More participation from the broader financial services ecosystem will help drive trust and scale for the tokenized economy and help the crypto market grow and mature,” declared KPMG chief economist Constance Hunter.

The Phase of Big Money

Institutionalization, according to the KPMG report, defines large-scale participation of fintech companies, banks, payment institutions, exchanges, broker-dealers, and other entities in an industry. The involvement of major institutions in the crypto space could validate its potential to reduce friction and inefficiencies that exist in the current global economic system.

As of now, the crypto market is undergoing a phase of speculation driven by investments at the retail levels. Individuals are betting more on the potential of cryptos than on what they can practically deliver, resulting in maximized risks in a mostly unregulated space. The KPMG study posed compliance with regulations as one of the challenges facing the cryptocurrency industry, stating that crypto businesses would need to clearly define their product before the regulators.

At the same time, a coherent approach at defining comprehensive legal parameters for crypto space could allow big businesses to enter significant capital into its market.

According to Coinbase, a contributor to the KPMG report, the market will transit from the speculative phase into the institutionalization one as it explores adoption by the world’s most prominent financial institutions. The San Francisco company maintained that they are already building scalable platforms required for “large players to enter the space,” adding that they would feature “high-frequency, low latency matching engine, transparent and efficient price discovery tools” to attract significant monies.

The KPMG report mentioned that Coinbase would also be a qualified custodian that allows the safe storage of assets in a compliant manner.

“Institutions have a different set of requirements than retail consumers and need to see a focus on compliance, transparency, and governance to use and transact with crypto comfortably,” it explained.

Cryptoassets are Inevitable

Regardless of the interim challenges faced by the cryptocurrency industry, the KPMG report predicted a bright future for it.

The study believed using cryptos would be a standard thing in the future as participants become more comfortable with them. It would – of course – happen when institutions find solutions to manage compliance, taxes, software upgrades (hard forks), security, financial auditing, and asset provenance.

“New tokens and assets are one thing, but new business models and market participants may redefine the space significantly over the next few years,” KPMG indicated.

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