GS Paper 3:
Syllabus: Effects of liberalisation on the economy (post-1991 changes), changes in industrial policy and their effects on industrial growth.
Context:
Recently, EU Parliament agreed upon a new law Markets in Crypto-Assets (MiCA) to regulate cryptocurrencies.
Recent issues: Stablecoins came in question after the crash of Terraform Labs’ Luna token.
About MiCA:
- It seeks to address concerns like money-laundering, protection of consumers and investors, accountability of crypto firms, stablecoins and the environmental footprint of crypto mining.
- It excludes NFT (non-fungible tokens)
Provisions:
- Minimum Liquidity: MiCA would mandate currencies like stablecoin issuers to maintain minimum liquidity to provide for sudden large withdrawals by users, and the reserves must also be protected from insolvency.
- Supervision: The European Banking Authority (EBA) has been brought in to supervise stablecoins, and the law asks stablecoin issuers to provide claims to investors free of charge. In addition,
- Capping: Large coins which are used as a means of payment will be capped at €200 million worth of transactions per day.
- Public register: MiCA requires the EBA to maintain a public register of non-compliant crypto asset service providers (CASPs).
- Mandatory to declare Environmental footprint: Under MiCA, crypto companies will be required to declare their environmental and climate footprint.
Indian regulation:
- Through Tax: India levied a 30% tax on income from the transfer of cryptos from April and added a 1% tax deduction at source from 1 July.
- Wait and watch: Indian regulators are also expected to consider rules being developed in the US before taking concrete decisions.
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Practice Questions:
Q. What is a cryptocurrency? Discuss the need for the formulation of a clear, constructive, and adaptive regulatory environment for cryptocurrencies in India. (15M)
Q. With reference to “Blockchain Technology”, consider the following statements: (UPSC CSE 2020)
- It is a public ledger that everyone can inspect, but which no single user controls.
- The structure and design of blockchain is such that all the data in it are about cryptocurrency only.
- Applications that depend on basic features of blockchain can be developed without anybody’s permission.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 only
(d) 1 and 3 only
Answer: d
Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). It is free and can be used to develop several applications including cryptocurrency.
Source: Live Mint
