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Thursday, March 04, 2021

Post-Tesla Investment: Global financial cos, Twitter opening room for Bitcoin; India yet to take call

In India, however, the adoption and use of cryptocurrencies still remains a pipe dream, with the country going back and forth on the issue.

Written by Pranav Mukul | New Delhi |
Updated: February 12, 2021 7:36:39 am
Tesla, BitcoinThe government has readied a new legislation — Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 — that aims to ban all private cryptocurrencies, while setting the stage to roll out the legal framework for an “official digital currency”.

With cryptocurrencies getting more backing from global institutional players, the rate of Bitcoin, the most popular of the bunch, touched an all-time high level of $48,000 Thursday. After electric carmaker Tesla announced a $1.5 billion investment in Bitcoin last week, financial services companies such as payments player Mastercard and US-based lender Bank of New York Mellon also announced their intention of validating these alternative digital assets.

In India, however, the adoption and use of cryptocurrencies still remains a pipe dream, with the country going back and forth on the issue.

The government has readied a new legislation — Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 — that aims to ban all private cryptocurrencies, while setting the stage to roll out the legal framework for an “official digital currency”. The Reserve Bank had banned cryptocurrencies in 2018, which was later overturned by the Supreme Court last March. Also, another Bill that was reportedly in the works in 2019, aiming to ban cryptocurrency and criminalise its possession in India, was ultimately shelved.

The new Bill comes after an Inter-Ministerial Committee (IMC) constituted under the Chairmanship of Secretary, Department of Economic Affairs to study issues related to virtual currencies recommended in its report that all private cryptocurrencies, except any cryptocurrency issued by the State, be prohibited in India.

The Finance Ministry, in a statement in Rajya Sabha on February 9, said it would “take a decision on the recommendations of the IMC and the legislative proposal, if any, would be introduced in Parliament following the due process”.

Meanwhile, in addition to Mastercard and BNY Mellon, microblogging site Twitter is considering adding Bitcoin to its company reserves. According to a CNBC report, Twitter’s chief financial officer Ned Segal said: “We have done a lot of the upfront thinking to consider how we might pay employees should they ask to be paid in Bitcoin, how we might pay a vendor if they asked to be paid in Bitcoin and whether we need to have Bitcoin on our balance sheet”.

Notably, Square — a financial services and mobile payment firm, also company founded by Twitter founder Jack Dorsey — has the third largest institutional holding of Bitcoin after MicroStrategy and Tesla.

In a blog post, Raj Dhamodharan, executive vice president—Digital Asset & Blockchain Products & Partnerships at Mastercard, wrote: “Whatever your opinions on cryptocurrencies — from a dyed-in-wool fanatic to utter skeptic — the fact remains that these digital assets are becoming a more important part of the payments world. We are seeing this fact play out on the Mastercard network, with people using cards to buy crypto assets, especially during Bitcoin’s recent surge in value. We are also seeing users increasingly take advantage of crypto cards to access these assets and convert them to traditional currencies for spending”.

He noted that Mastercard will start supporting select cryptocurrencies directly on its network this year. However, he added that not all of today’s cryptocurrencies will be supported on its network and that the company will only on board the stable currencies that meet its requirements.

Similarly, BNY Mellon said it will finance cryptocurrencies like Bitcoin, in addition to eventually letting these digital assets pass through the same financial network that it currently uses for traditional financial assets. “Digital assets are becoming part of the mainstream,” Roman Regelman, chief executive of the bank’s asset-servicing and digital businesses was quoted as saying in a report by The Wall Street Journal. “Pending further evaluations and approvals, we expect to begin offering these innovative and industry-shaping capabilities later this year,” he said.

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