Uganda, Argentina, and India Placing Tighter Restrictions on Crypto
Since the Fed half-point interest rate hike last week, the crypto market cap has decreased by some $400 billion and sent coins into a downward trend. BTC is down 20% from last week while ETH is testing new lows previously unseen since early this year. While the recent Fed meeting notes and announcement are a driving force against the crypto market, a number of international events have contributed to the recent dips.
Less than a week after Banco Galicia and digital bank Brubank SAU announced that they would provide access to cryptocurrency for their customers, the Central Bank of the Republic of Argentina banned traditional financial institutions from offering crypto trading options. The decision was influenced in no small part by the IMF, which recently approved a debt restructuring deal of Argentina’s 2017 $44 billion bailout. The restructure was apparently contingent on the South American country pursuing policies that would discourage the use of cryptocurrencies.
Other central banks around the world are approaching cryptocurrency with caution. The Bank of Uganda issued a warning to financial institutions against serving as an intermediary for cryptocurrency transactions by stating that none have been licensed to do so legally. Despite this, the central bank’s director for national payments, Andrew Kawere, insists it has not banned cryptocurrency but has “simply applied some speed brakes.” Other motivation for this move could be owed to the fact that the bank is in the preliminary stages of considering a central bank digital currency (CBDC). Empirically, countries exploring a CBDC have placed tighter constraints or banned cryptocurrency trading, namely China and Nigeria.
Alternatively, governments are using taxation as a deterrence for crypto trading. In India, the Goods and Service Tax (GST) Council will decide on whether to enforce a 28% tax on cryptocurrency, bringing it under the same rate as casinos, gambling, and lottery wins. For a country that supports an estimated 10% of crypto users worldwide, a heavy tax could represent a significant setback for the market.
These recent developments carry significant implications for their own people however the policies that will ripple the largest across the crypto market will undoubtedly be from the West. The US has yet to pass legislation or establish a regulatory framework on cryptocurrencies, and while the EU and UK have made steps towards regulatory action, their overall outlook remains equally ambiguous. For now, these slumps represent an opportunity for a lower entry position. After all, for every country that places tighter restrictions on crypto, there's another that welcomes it.