Značka: Reserve Bank of India

First US State where you can no longer mine crypto: Law Decoded, Nov. 21-28

The state of New York became the first one in the United States to impose a moratorium on proof-of-work (PoW) mining, albeit only for two years. Last week, New York governor Kathy Hochul signed the moratorium into a bill, prohibiting any new mining operations that aren’t based on 100% renewable energy. The renewal of licenses would also be frozen. In eight months, the anti-mining bill made its way from the first passing through the state Assembly to the governor’s pen. The statewide development seems unlucky for New York City mayor Eric Adams, who is focused on making the city a crypto hub. Commenting on the moratorium’s signing into law, Adams sounded more peaceful than he was in June when he promised to ask the governor of the state to veto the document. This time Adams pledged to work with the legislators “who are in support and those who have concerns” and come “to a great meeting place.”At the end of the day, the state of New York remains perhaps the least welcoming place for crypto due to its regulatory regime: Not only do the miners have to get a fully renewable power source now, but the trading platforms are struggling since the hard-to-get BitLicense introduction in 2015. However, some officials believe the national crypto laws should look more like New York’s. US senators urge Fidelity to reconsider its Bitcoin offeringsUnited States senators Elizabeth Warren, Tina Smith and Richard Durbin have renewed their calls for Fidelity Investments to reconsider offering a Bitcoin (BTC)-linked 401(k) retirement product. In a letter addressed to Fidelity Investments CEO Abigail Johnson, the three senators said the recent fall of FTX is more reason than any for the $4.5 trillion asset management firm to reconsider its Bitcoin offering to retirement savers. The senators also added that “charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors” have played a huge role in manipulating the price of Bitcoin, which in turn has impacted 401(k) retirement savings holders who have invested in Fidelity’s Bitcoin product.Continue readingThe Reserve Bank of India to launch a retail CBDC pilot in DecemberThe Reserve Bank of India (RBI) is in the final stage of preparing the rollout of the retail digital rupee pilot. Each bank participating in the trial will test the central bank digital currency (CBDC) among 10,000 to 50,000 users. To integrate the new payment option, the banks will collaborate with PayNearby and Bankit platforms. The CBDC infrastructure will be held by the National Payments Corporation of India (NPCI). Reportedly, at some point, the pilot is going to include all the commercial banks in the country. Earlier the RBI launched the wholesale segment pilot for the digital rupee, with the main use case being the settlement of secondary market transactions in government securities. Continue readingTornado Cash developer to stay detained until next year’s hearingA Dutch court hearing ruled that the Tornado Cash developer Alexey Pertsev would be held for another three months as the investigation continues. The prosecution outlined a broad overview of its investigation, painting Pertsev as a central figure in Tornado Cash’s operation before Advocate WK Cheng delivered his first defensive argument. The advocate confirmed that the first session has been postponed to Feb. 20, 2023, and reiterated his belief that the state had presented a one-sided interpretation of Pertsev’s involvement with Tornado Cash. Continue readingTurkey seizes FTX assets amid the ongoing investigationTurkey’s Financial Crimes Investigation Board (MASAK) has seized assets belonging to Sam Bankman-Fried after launching an investigation into FTX’s affairs in the country. The Turkish investigatory body found that FTX TR failed to safely store user funds, embezzled customer funds through shady transactions, and manipulated supply and demand in the market by having customers buy and sell listed cryptocurrencies that were not backed by actual cryptocurrency holdings.As a result of these findings, MASAK seized Bankman-Fried’s and affiliates’ assets after finding strong “criminal suspicion” on the above-mentioned points. A LinkedIn post from FTX TR noted that the exchange had over 110,000 users and processed an average monthly transaction volume of $500 million–$600 million since the launch of its mobile application earlier in 2022. Continue reading

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The Reserve Bank of India to launch a retail CBDC pilot in December

Having tested the wholesale usage of its central bank digital currency (CBDC), the Reserve Bank of India (RBI) is preparing to conduct the retail pilot of the “digital rupee.” The pilot should launch within a month.According to the Economic Times of India, the RBI is in the final stage of preparing the rollout of the retail digital rupee pilot. Among the participants are the State Bank of India, Bank of Baroda, ICICI Bank, Union Bank of India, HDFC Bank, Kotak Mahindra Bank, Yes Bank and IDFC First Bank. Reportedly, at some point, the pilot is going to include all the commercial banks in the country. Each bank participating in the trial will test the CBDC among 10,000 to 50,000 users. To integrate the new payment option, the banks will collaborate with PayNearby and Bankit platforms. The CBDC infrastructure will be held by the National Payments Corporation of India (NPCI). As the anonymous source specified to Indian journalists: “The e-rupee will be stored in a wallet, the denominations will be available as per the customer’s request, just like you request cash from an ATM. Banks are launching this only in select cities.”Related: Crypto regulation is 1 of 8 planned priorities under India’s G20 presidency — Finance MinisterBoth customers and merchants will have to download the special wallets for the CBDC, although later the RBI plans to fully integrate it with existing digital banking services. Reportedly, the digital rupee is intended as a supplement to the current payment system and not its replacement. The wholesale segment pilot for the digital rupee was launched by RBI on Nov. 1. Its main use case has been the settlement of secondary market transactions in government securities. However, no information on the successful ending of the wholesale pilot is available at the time of writing.

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Binance distances from WazirX as Indian regulators keep chasing crypto

The Twitter exchange between WazirX co-founder Nischal Shetty and Binance CEO Changpeng “CZ” Zhao over the ownership of the Indian crypto exchange grabbed a lot of headlines in the first week of August. WazirX was reportedly acquired by Binance in 2019, and ever since then, the Indian crypto exchange has been referred to as “Binance-owned”; however, to everyone’s surprise, CZ took to Twitter to claim that the acquisition process never went through and Binance has no ownership in the Indian crypto exchange.2/ On 21 Nov 2019, Binance published a blog post that it had “acquired” WazirX. This transaction was never completed. Binance has never – at any point – owned any shares of Zanmai Labs, the entity operating WazirX.— CZ Binance (@cz_binance) August 5, 2022CZ said that Binance only provides wallet services for WazirX as a tech solution and WazirX is responsible for all other aspects of the exchange, including user sign-up, Know Your Customer (KYC), trading, and initiating withdrawals.Shetty countered CZ’s claim in another tweet thread claiming that Binance indeed owns the Indian crypto exchange WazirX and that the parent company, Zanmai Labs, only operates crypto and Indian rupee pairs in WazirX on a Binance license. Binance, on the other hand, operates crypto-to-crypto pairs and processes crypto withdrawals, which can be verified by the companies’ terms of services.The two co-founders went back and forth for the next couple of days accusing each other of misrepresenting certain facts.2/ Original deal included sale of WazirX Technology (IP)Same Technology was then licensed to Zanmai by Binance for INR marketPost licensing:Binance operates crypto-crypto trading, crypto deposit/withdrawalsZanmai operates INR-Crypto trading, INR deposit/withdrawal— Nischal (Shardeum) ⚡️ (@NischalShetty) August 6, 2022

Based on the tweet exchange between the two co-founders, it is clear that there was indeed an acquisition deal, to begin with, but Shetty claimed the deal was for the technology transfer and not the whole company, and this is the reason WazirX technology is owned by Binance, while Zanmai Labs operate only crypto/INR pairs using a Binance license.When Cointelegraph reached out to Binance to get some clarity on the acquisition deal, the exchange denied Shetty’s earlier claims that the exchange operates crypto-to-crypto trading pairs. A spokesperson from Binance told Cointelegraph:“Binance does not operate crypto-to-crypto trades on the WazirX exchange. The WazirX exchange is wholly run and operated by Zanmai Labs. Further, while we did agree to purchase certain technical assets and intellectual property of WazirX, this agreement was not completed.”In another tweet, CZ claimed that Binance had tried to pursue the acquisition as late as February but was refused by WazirX. Shetty again responded to the tweet, claiming the deal involved an acquisition by Binance’s parent entity, but at the time of the deal, Binance gave an “ambiguous answer that parent entity is under restructuring.”The Binance spokesperson told Cointelegraph, “The agreement between Binance and Zanmai Labs was for the acquisition of certain assets and intellectual property of WazirX, not equity in Zanmai Labs.” They further added, “We had sought the assets that were supposed to be transferred to us under the agreement, but this was not forthcoming, and the agreement was not (and could not be) completed.”WazirX, on the other hand, believes the solution to the current problem is either for Binance to buy out India operations using its parent entity instead of a random entity because it may create risk for users or for Binance to sell back WazirX.Taking three years to disclose the deal never went throughThe core reason for the fallout between the two companies seems to be the alleged money laundering investigation by India’s Enforcement Directorate (ED). The said investigation is from a year ago, and contrary to popular belief, the investigation is focusing on a Foreign Exchange Management Act (FEMA) violation rather than money laundering.ED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA, 1999 for transactions involving crypto-currencies worth Rs. 2790.74 Crore.— ED (@dir_ed) June 11, 2021

FEMA is one of many capital control regulations that the Indian government has put in place to prevent capital from leaving the country. According to FEMA, an individual is only permitted to send a maximum of $250,000 for specific purposes per year outside of India. However, due to the lack of regulations around the crypto market, FEMA laws don’t cover cryptocurrency transfers. As a result, any users sending crypto transfers of above $250,000 would still violate FEMA laws. That seems to be the case with the ED’s current investigation into WazirX. In total, 10 other crypto platforms are facing similar investigations from the ED.Crypto investment is not one of them. But technically, if to send more than the set amount, even in crypto, it would be a violation of FEMA. Therefore, when transferring funds to an exchange that is not India-domiciled, it is seen as a violation of FEMA regulations.Related: AML and KYC: A catalyst for mainstream crypto adoptionThe year-old investigation made headlines again in 2022 followed by the ED freezing $8.1 million worth of the exchange’s assets. The ED claimed that it couldn’t find on-chain records of transactions amounting to millions of dollars. However, WazirX contradicted ED’s claim and said it has records for every single transaction.The off-chain transactions referred to by the ED are the direct transfer between WazirX and Binance, a feature introduced by the two parties as part of the partnership. The feature allows the transfer of assets between two exchanges without users having to pay any transfer fee.WazirX in its official statement claimed that there was a major misunderstanding surrounding the off-chain transfers. The crypto exchange said that an ED’s press release is trying to deem these transitions as mysterious and untracked, while in reality, only KYC users of the platform can use the services. Thus, there is no question about untraced funds, and WazirX said it was confident in proving ED wrong in the court of law.pic.twitter.com/9GzoNF61yi— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) August 9, 2022

Binance eventually shut down the direct bridge between the two platforms on Aug. 11 and notified its users in advance while reminding them that they can still transfer funds to WazirX using standard wallet transfers.While both Binance and WazirX have assured full cooperation with the investigation, a source familiar with the issue who chose to remain anonymous told Cointelegraph that the investigation spooked Binance, which eventually led to the fallout. Binance later confirmed to Cointelegraph that the ED investigation compelled it to inform its users. A Binance spokesperson described the issues to Cointelegraph:“We encountered issues with Zanmai Labs. We have tried to work with them to find a resolution for some time. The recent news about the ED investigations and notices on Zanmai is also material developments. We felt the need to clarify this in the interests of user protection.”Will the Binance–WazirX saga impact Indian crypto investors?The Binance–WazirX saga created a panic among Indian investors who were using WazirX. Many of these traders liquidate their assets immediately after the war of words between the two co-founders erupted. The sentiment only got worse, with CZ prompting users to transfer their assets to Binance.WazirX told Cointelegraph that there were some signs of liquidation and movement of funds in the aftermath of the tweets, but after assuring users that their funds would be safe, the exchange said the trend has been on a decline.Related: Built to fall? As the CBDC sun rises, stablecoins may catch a shadowIndian crypto entrepreneurs believe that, regardless of who is at fault, the barrage of words on social media did impact investor confidence. Sathvik Vishwanath, the co-founder of the Indian crypto exchange Unocoin, told Cointelegraph that “such fracas affects the crypto market, including its investors.” He added further:“This kind of action in the crypto market poses a negative impression on the whole ecosystem, but the issue seems reversible. Either they need to complete the transaction or undo the transaction and should publicly identify the owners. Transparency is the key here that seems to be missing.”The Indian crypto ecosystem had thrived until now and produced several crypto unicorns over the past few years; however, with the implementation of a 30% crypto tax and 1% tax deduction at source this year, the trading volume on major Indian crypto exchanges has slumped dramatically. The newly implemented tax rules didn’t just deter Indian investors but also prompted several leading crypto services providers to look for crypto-friendlier jurisdictions. The Indian central bank has always called for a ban on crypto use in any form, while the central government has changed its stance over time without offering any regulatory framework. Amid growing complexities for the Indian crypto ecosystem, many market pundits believe the current Binance–WazirX saga could be used by Indian law agencies and the central bank to build a case against crypto regulations.

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India needs global collaboration to decide on crypto's future, says finance minister

Indian finance minister Nirmala Sitharaman has called for global collaboration on cryptocurrencies, assessing their pros and cons to form a common standard and taxonomy.Addressing a question on cryptocurrency in the Lok Sabha, the lower house of the Indian parliament, Sitharaman said that the Indian central bank had advised the government to prohibit the use of cryptocurrencies as it poses a risk to financial stability. However, the government is looking for a global approach. She said:”Any legislation for regulation or banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.”She also reiterated the Indian central bank’s stance on crypto’s value is based on speculation. She added that “the value of fiat currencies is anchored by monetary policy and their status as legal tender. However, the value of cryptocurrencies rests solely on the speculations and expectations of high returns that are not well anchored.”Reserve Bank of India (RBI), the Indian central bank, has maintained an anti-crypto stance since 2013, issuing multiple advisories against investing in digital assets and even prohibiting banks from offering services to crypto firms in 2018. The banking ban was eventually overturned after a supreme court ruling in 2020.While the Indian government is yet to decide whether to move ahead with a ban or regulate the nascent crypto sector, the government was relatively quick to propose and implement two crypto tax laws that have wreaked havoc on the budding crypto industry.Related: The regulatory implications of India’s crypto transactions taxDuring the January parliamentary session, the finance minister announced a 30% tax on unrealized gains and a 1% tax deduction at the source (TDS). The laws were heavily inspired by the country’s gambling and betting laws, resulting in an instant decline in trading volume across exchanges just weeks after the new 30% tax came into effect.The trading volumes and trader interests plunged further after 1% TDS came into effect on July 1. Many thriving crypto unicorns hopeful of a positive regulatory approach have started shifting their bases to crypto-friendly legislation, such as Dubai and Singapore.

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CBDCs can “kill” private crypto: India's RBI deputy governor to IMF

In discussion with the International Monetary Fund (IMF), T Rabi Sankar, the deputy governor of the Reserve Bank of India (RBI), reflected an anti-crypto stance as he spoke about India’s potential to disrupt the crypto and blockchain ecosystem. Rabi Sankar started the conversation by highlighting the success of the Unified Payments Interface (UPI), India’s in-house fiat-based peer-to-peer payments system — which has seen an average adoption and transaction growth of 160% per anum over the last five years. “One of the reasons it is so successful is because it’s simple,” he added while comparing UPI’s growth with blockchain technology. According to Rabi Sankar:“Blockchain, which was introduced six-eight years before UPI started, even today is being referred to as a potentially revolutionary technology. [Blockchain] use cases haven’t really been established that much at the speed it initially was hoped for.”However, the RBI official confirmed that a large population in India still lacks access to UPI-based banking due to the unavailability of smartphones. To counter this, the Indian government is working on offline payment platforms, some of which have started rolling out to the masses.June 2 at 7:00am ET // At the Frontier: India’s Digital Payment System and Beyond will explore the latest developments in digital payments with a focus on lessons from India as well as future with a significant role for Central Bank Digital Currencies. https://t.co/ZSj7i15fBG pic.twitter.com/X6cVyHewEs— IMF (@IMFNews) May 31, 2022Rabi Sankar also stated that banks will remain crucial for providing liquidity services to the general public in India, warning that technology is merely a tool and cannot be used to create currencies:“A currency needs an issuer or it needs intrinsic value. Many cryptocurrencies which are neither are still being accepted at face value. Not just by gullible investors but also the experts, policymakers or academicians.”He further stated that RBI does not believe that stablecoins, like Tether (USDT), should be accepted blindly as 1-to-1 fiat pegged currencies. Speaking about the advantages of a digital rupee, Rabi Sankar said:“We believe that central bank digital currencies (CBDCs) could actually be able to kill whatever little case that could be for private cryptocurrencies.”Related: India to roll out CBDC using a graded approach: RBI Annual ReportOn May 28, India’s central bank, RBI, proposed a three-step graded approach for rolling out CBDC “with little or no disruption” to the traditional financial system.As Cointelegraph reported, finance minister Nirmala Sitharaman first revealed the plan to launch a CBDC in 2022-23 with an aim to provide a “big boost” to the digital economy. RBI’s report revealed that the central bank is currently experimenting to develop a CBDC that addresses a wide range of issues within the traditional system.

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India cooperates with IMF on crypto consultation paper

The Department of Economic Affairs of India is finalizing a consultation paper on crypto currencies, which then will be handed over to the federal government. The implementation of the document could bring the country of 14 billion people closer to the international regulatory consensus on digital assets. On Monday, May 30, during an event hosted by the Ministry of Labour and Employment, Economic Affairs Secretary Ajay Seth revealed that his department is finishing the work on the consultation paper, which would define the nation’s stance on crypto. The document was crafted in cooperation with industry stakeholders, the International Monetary Fund (IMF) and the World Bank. Seth specified that the paper would strengthen India’s commitment to “some sort of global regulations”:“Digital assets, whatever way we want to deal with those assets, there has to be a broad framework on which all economies have to be together.”Answering the question about the possible outright ban, the official acknowledged that any national-level prohibition wouldn’t work in isolation: “Whatever we do, even if we go to the extreme form, the countries that have chosen to prohibit, they can’t succeed unless there is a global consensus.”Related: Indian government’s ‘blockchain not crypto’ stance highlights lack of understandingIn recent years India has been demonstrating a rather militant posture when it comes to crypto. In 2017 the Reserve Bank of India (RBI) and the Ministry of Finance compared the digital currencies to Ponzi schemes and prohibited any operations with them for commercial banks and lenders. In 2022, long after the ban had been formally lifted, the RBI warned about the threat of “dollarization” that crypto poses, while in his recent virtual speech at the World Economic Forum in Davos, the prime minister Narendra Modi called cryptocurrency a global challenge that demands a “collective and synchronized action” from all of the national and international bodies.

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India to roll out CBDC using a graded approach: RBI Annual Report

Further cementing India’s decision to introduce an in-house central bank digital currency (CBDC) in 2022-23, the Reserve Bank of India (RBI) proposed a three-step graded approach for rolling out CBDC “with little or no disruption” to the traditional financial system.In February, while discussing the budget for 2022, Indian finance minister Nirmala Sitharaman spoke about the launch of a digital rupee to provide a “big boost” to the digital economy. In the annual report released Friday by India’s central bank, RBI revealed exploring the pros and cons of introducing a CBDC.In the report, RBI stressed the need for India’s CBDC to conform to India’s objectives related to “monetary policy, financial stability and efficient operations of currency and payment systems.”Based on this need, RBI is currently examining the various design elements of a CBDC that can co-exist within the existing fiat system without causing disruptions. The Indian Finance Bill 2022, which enforced the introduction of a 30% crypto tax on unrealized gains, also provides a legal framework for the launch of a digital rupee:“The Reserve Bank proposes to adopt a graded approach to introduction of CBDC, going step by step through stages of Proof of Concept, pilots and the launch.”Halfway through 2022, at the proof of concept stage, RBI is in the process of verifying the feasibility and functionality of launching a CBDC.Related: RBI warns of crypto ‘dollarization’ of Indian economyEarlier this month, on May 17, RBI officials reportedly warned against crypto adoption citing the risks of “dollarization” of the Indian economy.As Cointelegraph reported based on the Economic Times’ findings, key RBI officials including governor Shaktikanta Das raised concerns regarding the U.S. dollar-dominated world of cryptocurrencies. An unnamed official stated:“Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, it may eventually lead to dollarization of a part of our economy which will be against the country’s sovereign interest.”“It [crypto] will seriously undermine the RBI’s capacity to determine monetary policy and regulate the monetary system of the country,” they added.

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