Cryptocurrencies, or at least defining the term, seem to be a hot topic at the current G20 summit. In fact, it seems that the group is pushing to define them as assets and not currencies at all.
According to Bloomberg, this will be discussed on Tuesday. However, a draft statement shows that the group believes that cryptocurrencies “lack the traits of sovereign currencies”, and therefore should not be referred to as such.
Klaas Knot, who is the president of De Nederlandsche Bank NV, had this to say:
Whether you call it crypto assets, crypto tokens, definitely not cryptocurrencies, let that be clear a message as far as I’m concerned. I don’t think any of these cryptos satisfy the three roles money plays in an economy.
Knot also chairs the Financial Stability Board’s standard committee on the assessment of vulnerabilities.
Ilan Goldfajn, who is the President of the Central Bank of Brazil seems to have a similar view, believing that the crypto market’s volatility and its lack of easy payment options make it a non-currency. He added:
It’s more of a token asset than a currency.
Ahmed Alkholifey, the Governor for the Saudi Arabian Monetary Authority, added:
The first function of a currency is to serve as a stable medium of exchange, and experience today with various crypto assets in circulation are not at all satisfactory in this regard.
Asset Tax Implications
If virtual currencies are declared assets, as they’ve recently been defined as in the US state of Wyoming, trading in them could be subject to capital gains tax. According to Credit Karma Inc, a US-based finance company, out of the 250,000 federal tax returns filed by the Internal Revenue Service (IRS) in the US, less than 100 declared crypto gains and/or losses.
Regulatory Action Required
As crypto popularity increases, so do fears of the apparent dangers that it presents such as aiding in money laundering and tax evasion, nefarious activities that were happening long before Bitcoin. However, these concerns are some of the reasons that G20 participants have given for pushing for regulations in the industry.
French Finance Minister Bruno Le Maire had this to say:
Crypto is more an asset than a currency. If we want to move on and protect citizens from any kind of speculations or money laundering or terrorism financing, we need rules.
Disrupting the World’s Economy
A leading cause for crypto concern is that decentralized digital currencies could, in fact, threaten the global financial system, a sentiment vocalized by Mark Carney, the Governor for the Bank of England as well as the chairperson for the Financial Stability Board.
This perceived threat does not seem to be consigned to just decentralized virtual currencies though. The Bank of International Settlements had previously said that even central bank digital currencies (CBDCs) could disrupt the international financial sector.
Do you think that cryptocurrencies should be defined as assets? Let us know in the comments below!
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