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Cryptocurrency prices plummet after the Centre proposes legislation to prohibit the use of private cryptocurrencies in 2022

Cryptocurrency prices plummet after the Centre proposes legislation to prohibit the use of private cryptocurrencies

 

Following news that the government had introduced a Bill in Parliament to prohibit all private cryptocurrencies in India, with a few exceptions to “promote the underlying technology of cryptocurrency and its uses,” cryptocurrency markets crashed.Cryptocurrency prices plummet after the Centre proposes legislation to prohibit the use of private cryptocurrencies

The drop in cryptocurrency prices ranged between 10% and 20%. According to CoinDesk, Bitcoin was down about 17%, Ethereum was down 15%, and Tether was down nearly 18%.

In addition, it seeks to outlaw all private cryptocurrencies in India. It does, however, allow for certain exceptions in order to promote the underlying technology of cryptocurrency and its applications. According to the bill’s description on the Lok Sabha website,

Prime Minister Narendra Modi met with senior officials earlier this month to discuss cryptocurrencies. In his speech to the Sydney Dialogue on November 18, Prime Minister Modi stated that all countries must ensure that cryptocurrencies do not “end up in the wrong hands.”

The Reserve Bank of India (RBI) has stated that cryptocurrencies pose a serious threat to the country’s macroeconomic and financial stability.Why fall in bitcoin, ethereum prices in India is premature — Quartz India

While regulators have long expressed concerns about these digital currencies, there is currently no regulation or ban on the use of cryptocurrencies in the country.

Why is crypto pricing dropping?

The price of Bitcoin has been steadily declining since November, but the cryptocurrency’s sharp price drop was most likely triggered by rumours about digital asset regulation in the United States.

The government is in the process of developing a strategy to address the economic, regulatory, and national security challenges posed by Bitcoin and other cryptocurrencies.

According to reports, the administration is also looking into the opportunities created by the rise of digital assets, with the Biden administration’s strategy potentially being made public as early as February.

The value of Bitcoin is also affected by policy changes made by the Federal Reserve of the United States. Last December, Federal Reserve Chair announced that the Federal Market would double the monthly rate at which capital requirements would be decreased.

 

Budget session: Centre to unveil a law to ban private cryptocurrencies,  introduce official digital currency - The Hindu BusinessLine

The FOMC will stick to the bond purchase schedule announced in December 2021. While the fed funds rate is currently near zero, inflationary developments may change that. Keeping high inflation from becoming “entrenched”

The Federal Reserve’s inflation-control measures have had a negative impact on the price of Bitcoin. Risky assets, such as Bitcoin, tend to lose value after the Federal Reserve changes its policy to become more fiscally conservative.

In general, as Bitcoin matures and becomes more widely adopted, its price will become increasingly correlated with the prices of traditional assets such as stocks. Because of this growing correlation, any event that causes price declines in traditional markets is likely to cause similar or greater price declines in Bitcoin.

Publicly traded companies with significant Bitcoin exposure have seen significant price declines. On Monday, the stock prices of Coinbase Global, Inc. (COIN) and MicroStrategy Incorporated (MSTR) fell by more than 15% at their session lows, though both stocks recovered somewhat on Tuesday.

While Coinbase is a cryptocurrency exchange with direct operational exposure to Bitcoin, MicroStrategy is an enterprise software company with billions of dollars in Bitcoin on its balance sheet.

Cryptocurrency prices today: Bitcoin, Ether rise slightly after falling;  altcoins struggle - Business News

Bitcoin investors may not need to be concerned about the recent market downturn, but it is critical to understand the factors influencing Bitcoin’s price movements.

Aside from rumours and changes in government policy, investors should anticipate that the prices of Bitcoin and other digital assets will increasingly move in tandem and uncorrelated with traditional asset prices, but the same may not be true for the most well-known cryptocurrencies, such as Bitcoin and Ethereum.

Why are crypto markets crashing?

Cryptocurrencies are off to a rocky start to the year. As of Jan. 26, Bitcoin (BTC) had lost about 20% of its value year to date, while Ethereum (ETH) and Binance Coin (BNB) had lost about 30% and 25%, respectively, despite a late surge higher. These are the top three cryptocurrencies in terms of market capitalization, excluding the stablecoin Tether (USDT), which is pegged to the US dollar.

This isn’t the first time cryptocurrency has plummeted. From mid-May to mid-July 2021, cryptocurrencies experienced another significant drop, with Bitcoin falling by more than 45 percent.Regardless of the volatility, many investors remain interested in cryptocurrencies. As crypto adoption grows, it’ll become more popular, says Vin Narayanan, vice president of strategy at Early Investing.

To study digital currency legislation, the central government has scheduled a series of meetings with all parties. Prime Minister Narendra Modi organised a high-level meeting with officials from various ministries and the Reserve Bank of India to discuss the issue.

The Reserve Bank of India as well as the Securities and Exchange Board of India have expressed worry about the unregulated rise of cryptocurrencies in India, particularly among vulnerable regular investors. There have already been rumours that the government is mulling changes to earnings tax legislation to bring cryptocurrencies into the tax net, with certain changes perhaps being included in upcoming Budget.

People are even paying capital gains tax on cryptocurrency income, and the law clearly states that the rate will be the same as for other services under the Goods and Services Tax (GST). People are already paying taxes on it, as far as I’m aware.

We’ll see if we can genuinely effect some changes in legal perspectives now that it’s grown so much. That, on the other hand, would be a budget-related activity. We’re moving near to the Budget, and we need to pay attention to it, according to Bajaj.

Crypto prices plummet after Centre's proposal to ban private  Cryptocurrencies barring few

The decision has already had repercussions on the global cryptocurrency market.

China’s crypto crackdown comes just days after Musk’s shocking announcement.

Bitcoin, the first and most widely used cryptocurrency, was introduced more over a decade ago. Despite the constant hype, few people are familiar with cryptocurrencies or blockchain, the technology that underpins them.

Despite the preaching and rising prominence of certain investors, only 16% of Americans indicated they have ever invested in cryptocurrency, according to a Pew Research Center poll from 2021. This increased to 31% of men between the ages of 18 and 29, and to 43% of men between the ages of 18 and 29.

Musk’s decision represents a significant shift for Tesla, which only began accepting Bitcoin as payment for its services in February 2021.

 

In a Twitter post, Musk reaffirmed his belief that cryptocurrency has a “promising future,” but that it “can not come at a high cost to the environment.”



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