GLOBAL CRYPTO SUMMIT : US SET TO BECOME GLOBAL CRYPTO CAPITAL.

CRYPTO ASSETS

The first ever Crypto Summit held  at White House on March 7th is determined to make America as the  crypto capital of the planet and Trump pledges to make the US the World's"bitcoin Super power " The declaration by president Donald Trump earlier in January that USA will create a strategic crypto currency reserves led to not only a big rally in  the crypto market but  also caused much anxiety and alarm in economic circles as well.  Trump observed that Reserves will hold five different crypto currencies namely bitcoin,Etherleum, Ripple, Sol and Ada.Crypto currencies/assets has been utilised differently in various countries.For instance while barter transactions has been followed in countries like Canada and Russia it is accepted as a mode of payment in Japan, Switzerland and Thailand. On the otherhand ElSavador treated it as legal tender. In  contrast China is not at all entertaining private crypto currencies/assets. It may be noted here that crypto currency ownership records are stored safely through distributed ledger technology known as Block Chain which serve as a public financial transaction database. The  Block chains are resistant to modification of their data which cannot be altered. In fact well regulated digital currencies/ assets can  provide much public benefits with greater efficiency and lower costs particularly for cross border transactions. Despite these merrits there have been increasing concerns by Governments about use of cryptos for dubious activities like money laundering  smuggling drug trafficking, terror financing and tax evasion and the vulnerability for cyber attack and hacking. 

CRYPTO SUMMIT 

Due to current move by US President the crypto currency/ assets is experiencing unprecedented historic shifts. The decision to create US crypto Strategic reserves consisting of five crypto currencies-Bitcoin, Ethereum, XRP,Solana  and Cardano .As per the January Presidential order titled "Strengthening American Leadership in Digital Financial Technology " working Group   will evaluate creation of a strategic Crypto stockpile which had evinced much interest and curiosity. This order has abruptly revoked previous  Biden Government's attempt to bring a central bank digital currency (CBDC) which is relatively less risky and more efficient. But  in the Crypto Summit with the participation of good number of top players from the crypto world in white house signalled a major policy shift in favour of digital assets, while expressing reservations about deep financial ties to the sector. However while major crypto investors are in backrolling campaign Trump is delivering on promises to legitimise the industry.  Trump established a strategic Bitcoin reserve and a US digital asset stockpile. The strategic Bitcoin reserves will be capitalised with Bitcoin as a reserve asset. The strategic Bitcoin reserve will be capitalised with Bitcoin owned by the Department of treasury, that was forefieted as part of criminal or civil asset forefeature proceedings Other agencies will evaluate their legal authority to transfer any Bitcoin owned  by those agencies. US will not sell Bitcoin deposited into  this strategic Bitcoin reserve whereas it will be deposited into the strategic Bitcoin reserves which will be maintained as a store of reserve assets. 

Usually strategic reserves are created for critical commodities like crude oil to bridge the gap  between demand and supply  so as to maintain price stability. Since there is no such requirement for cryptos the argument for  maintaining price stability and strategic reserves in cryptos is notrelevant. In any case Government is most unlikely to build this reserves with tax payers money. When such reserves are created it would be highly volatile and likely to lose value atleast in the short period.Moreover the Crypto industry itself is not impressed much by thismove.Consequently  the Bitcoin itself declined around 25% since January order, whereas the five named cryptos after an initial spike lost almost  the entire gains .It is significant to note that while Biden administration was working on a strong regulatory framework that would focus on consumer and investors protection, financial stability  regulation of smuggling, drug trafficking and financial inclusion and responsible innovation.,On the contrary Trump policy is  diametrically opposed inclined to remove all Scrutiny and curbs on investors and companies. Above all the Securities and Exchange  Commission of USA have withdrawn several investigations of irregularities by crypto companies. 

REGULATORY FRAMEWORK 

It has been observed that  in 2023 G 20 summit after accepting the joint paper prepared along with IMF and Financial Stability  Board, it provided the overreaching regulatory framework  for crypto currency regulation, digital assets and the finer details were left to individual countries under their jurisdiction. Even though participants of the white house Summit were optimistic about working with an administration that views crypto as a mainstream asset class ,they expressed hope for a straight forward regulatory process.Experts observed that though crypto has made rapid strides, but it is still a relatively ascent industry. Some in the industry feel disappointed that the Trump administration did not provide adequate support for the crypto industry and the price of Bitcoin has gone down about 3% in late afternoon trading and was set to finish the week down approximately 7% to $87000.While  crypto technology can unlock new ways to trade and invest in all assets from digital to real world, tokenisation will transform investing ,at the same time we need regulatory clarity for proper functioning. The US is creating and implementing a digital asset strategy for the first time as bitcoin and other crypto assets became part of mainstream activities. While in US the concept of crypto asset is becoming significant, greater  transparency will  increase the confidence with which US policy actions are viewed.Crypto assets are ultimately financial instruments and the ecosystem is long over due for crypto specific audit and attestation statements. Increased transparency, standardised reporting and higher levels of trust in the eco system are basic prerequisites for the success for a global crypto capital to function effectively .As far as India is concerned except taxing crypto earnings at 30% India is not at all encouraging trade or investment in crypto currency primarily because of huge volatility in their prices.On the otherhand RBI has not only developed Central Bank Digital currency but also implemented on a pilot project basis both at the wholesale and retail level which  happened to be great success. In short regulation and management of private  cryptos are highly challenging.