Among G-20 (Group of 20) countries a memorandum is making rounds finalizing views on crypto currency classification. G-20 is moving towards a consensus that cryptocurrencies may not be like currencies but in a sense can be an asset.
One of the outcomes of this classification will be that digital currencies or cryptocurrencies like Bitcoin, Ethereum, Ripple, etc. will be subjected to capital gains tax. Though many digital currency communities may not welcome this move, the news does not surprise many. Though, many countries have not classified crypto currencies, although those who have classified take it as an asset at this present stage.
According to the memorandum, cryptocurrencies lack the character, behavior, and qualities of a sovereign currency or fiat currency. Klaas Knot, president of Nederlandsche Bank NV, also serving a member of Financial Stability Board, a standing committee on the assessment of vulnerabilities is of the opinion not to name or call cryptocurrencies as cryptocurrencies. It can be called by any other name like crypto assets or crypto tokens. He is clear of his opinion and does not want to call it cryptocurrencies at any cost. He is of the opinion that crypto currency does not satisfy the three roles that money play in any economy.
What actually Knot meant that crypto currencies do not satisfy the basic principle that any sovereign currency has that is a medium of exchange, a unit of accounting and store of value.
- E. Dr. Ahmed Abdulkarim Alkholifey, governor of Saudi Arabian Monetary Authority believes that the first purpose of any currency is to provide a stable medium of exchange and cryptocurrencies which are in circulation today fail miserably in it. They are very volatile in this regard and are not at all satisfactory.
Those governments which are seeing cryptocurrencies as an asset will treat them differently from how they treat sovereign or fiat currencies. Government authorities and individual investors are not sure how the classification of crypto currency will affect if viewed from the taxation angle. Some supporters of cryptocurrency view this move by authorities and regulators as an attempt to clamp down this industry or sector because they view crypto currency as a threat to the traditional financial system.
One of the important functions of regulators and decision-making authorities will be to safeguard consumer against the fraud and malicious activities that is prevailing with cryptocurrencies. Governor Haruhiko Kuroda, Bank of Japan perceives to protect consumers and investors from it. He further said that cryptocurrencies should be protected from unwanted trading such as by money launderers, drug dealers and illegal arms dealers. Haruhiko Kuroda is of the opinion that cryptocurrencies cannot threaten legal currencies any time soon because of its speculative trading as a medium of payment and settlements. Cryptocurrencies do not have assets to back up their value.
Financial leaders from G-20 have talked about the impact of cryptocurrencies at their meeting in Buenos Aires. Major economies of G-20 attended the meeting and are in a process of coming out with viable explanation and clarification in near future. A firm deadline of July has been set for nations to clear their stand on crypto currency and put forward their recommendation on how to regulate this currency globally. Few members were of the opinion that more information was needed before any regulation can be proposed. Baby steps have already been taken in the direction.