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What if Bitcoin is securitized? Explain the future impact!

What if Bitcoin is securitized? Explain the future impact!

What if Bitcoin is securitized? Explain the future impact: A virtual currency that has been recognized by many people since around 2017. After that, it went down due to an accident related to the security of the exchange, but it has been attracting attention again due to the influence of the monetary easing of each country due to the corona disaster.

This time, I will explain the trend of “securitization of virtual currency” that will greatly affect the value of the virtual currency in the future. We will also explain the differences between virtual currencies and securities, as well as the impact of securitization.

Is virtual currency recognized as securities?

Initially, cryptocurrencies were enthusiastically accepted only by some IT savvy people, and the general public questioned their potential and security. 

However, its usefulness is now spreading to the general public, and there is a debate not only in India but all over the world that it should be recognized as a security. From here, let’s see if cryptocurrencies are recognized as securities.

What is the difference between virtual currency and securities?

A virtual currency is a currency that is exchanged only with electronic data. It can be used to buy and sell goods and services that are traded between an unspecified number of people via the Internet and can be exchanged for cash. 

The types of virtual currencies are increasing year by year, and typical ones are “Bitcoin”, “Ethereum”, and “Ripple”.

Virtual currencies can be broadly divided into the following two types.

Other than Bitcoin and Bitcoin = Altcoin

Bitcoin is a cryptocurrency that is well known worldwide and is trusted by many investors. On the other hand, virtual currencies other than Bitcoin, Ethereum and Ripple, are called an altcoin.

Approve virtual currency as securities? Trends in America

In recent years, there has been a debate around the world that cryptocurrencies should be recognized as securities, but no country has yet recognized cryptocurrencies as securities.

From here, let’s take a look at the regulatory rules of the United States, which is one of the most advanced in the world.

1. US Securities and Exchange Commission (SEC)

The US Securities and Exchange Commission is an American organization that monitors and oversees securities transactions and is called the Securities and Exchange Commission (SEC). 

In November 2018, the SEC announced that it would consider ICO (* Note), which is a method of procuring virtual currency, as securities and regulate it.

Cryptocurrencies newly released by ICO are called “tokens”, and foresighted investors purchase (invest) these tokens. 

The SEC has expressed the view that cryptocurrencies should be considered as securities, as this is quite similar to the method of raising funds using stocks.

* Note) ICO (Initial Coin Offering). New currency released. Almost synonymous with IPO (initial public offering) in terms of stock.

2. US Commodity Futures Trading Commission (CFTC)

CFTC approved the futures trading of the virtual currency “Bitcoin” in July 2017. This became a hot topic because Bitcoin was judged as a commodity (product). The commodities traded on CFTC are:

・ Energy (gas, crude oil)

・ Precious metals (gold, silver, platinum, etc.)

・ Grains (wheat, soybeans, corn, etc.)

・ Non-ferrous metals (aluminium, copper, etc.)

In the past, only visible real assets were commodities, so targeting invisible commodities like Bitcoin was a very innovative move.

3. US District Court

The US Commodity Futures Trading Commission (CFTC) argues that cryptocurrencies, including Bitcoin, are commodities and should be under surveillance. In conjunction with this allegation, the US District Court also ruled that “virtual currency is a commodity.”

What if Bitcoin is securitized? Explain the future impact!

In this way, in the United States, preparations are underway to define virtual currencies as securities. If virtual currencies such as Bitcoin are recognized as securities, the movement to list them on the stock exchange like stocks will become active. 

And it will attract more attention from more investors and be actively traded. Also, even in India, which has a slower pace than the United States, trends in the United States have a considerable impact, so future movements will attract attention.

What is the big difference between virtual currency and securities?

As of April 2021, virtual currencies are not recognized as securities even in India. From here, let’s take a closer look at how cryptocurrencies and securities are specifically different.

・ Cryptocurrency: Treated as miscellaneous income

・ Securities: Those that prove to be valuable as property

 Example) Stocks, government bonds, bonds, bills, checks

“Virtual currency”, which is miscellaneous income, is subject to taxation. It is said that it is often disadvantageous compared to other investments because it is necessary to pay 30% of the ordinary profit amount and in some cases more than half of the amount as tax because of progressive taxation, the larger the profit amount, the larger the amount of tax to be paid.

On the other hand, securities are classified into the following three types, which are “securities showing property rights”.

Monetary securities: Securities that can be exchanged for money, such as bills, checks, and transportation securities. 

Property securities: Securities that have the right to receive certain services, such as gift certificates, shipping securities, and evidence securities. 

Capital securities: Capital providers Securities that represent rights, including beneficiary securities such as stocks, bonds, and investment trusts.

Capital securities are taxable, but they are characterized by much lower taxes than miscellaneous income. As for stocks, you are supposed to pay an income tax of 15.315% and an inhabitant tax of 5%, so you can see that you can save a lot more than virtual currency. 

For this reason, there are many opinions and debates among investors that cryptocurrencies should be converted into securities.

Difference from securities seen in virtual currency “Ripple”

One of the biggest hits in the securitization issue is “Ripple,” which has a high degree of global recognition among virtual currencies. 

It has been sued by the US Securities and Exchange Commission (SEC) for selling 130 billion INR by exclusively selling virtual currencies that are very likely to be securities.N

However, Ripple consistently insists that it does not fall under securities, and seems to express a strong sense of crisis about being regarded as a security. The possible reasons are as follows.

Regulations are tightened by being under the supervision of regulators

ICO (Initial Coin Offering) becomes difficult to make

It becomes difficult to trade on the virtual currency exchange

Regulations are tightened by being under the supervision of regulators

It is said that there are concerns that the tightening of various regulations will make it impossible to carry out flexible and free transactions as before. In particular, stricter trading rules are thought to make it difficult to raise funds through an ICO (Initial Coin Offering), which can be a life-and-death problem for companies.

ICO (Initial Coin Offering) becomes difficult to make

By trading virtual currency as securities, it will not be possible to handle it on virtual currency exchanges that are not authorized by the jurisdiction.

It becomes difficult to trade on the virtual currency exchange

When virtual currency is securitized, it can only be traded on the stock exchange. Currently, the cryptocurrency exchange is open 24 hours a day, 365 days a year, so you can trade anytime, anywhere at any time. On the other hand, since stock exchanges trade within limited business hours, trading hours are limited, and you may miss a trading opportunity.

For the above three reasons, Ripple has not shown a positive attitude toward the securitization of cryptocurrencies and Ripple.

Financial Services Agency says “not securities”

Amid the topic of Ripple’s securitization issue, the Financial Services Agency of India issued a document to the world in January 2021 stating that “Ripple’s virtual currency XRP is not a security.” 

It was the first time the FSA had made a legal comment on the XRP issue, so it was a hot topic both inside and outside the industry.

Following the announcement by the Financial Services Agency, Mr Kitao, CEO of SBI Holdings, which operates a major domestic cryptocurrency exchange, said, “The Financial Services Agency of India has stated that XRP is not a security. 

SBI Holdings continues to be a solid partner of Ripple. We will work together to expand our business in Asia. ” The statements of the directors of the Financial Services Agency and major corporations are drawing attention from all over the world as they will be greatly involved in the proceedings in the United States.

How will the future treatment of Bitcoin change?

Bitcoin is known as a representative currency of virtual currency, and most of you have heard of it once. Although various virtual currencies are issued, Bitcoin has always kept the top market capitalization. 

From here, I will explain the movement toward the securitization of Bitcoin and future trends.

What if Bitcoin is securitized? Explain the future impact!

There is a high possibility that it will be securitized in the future

Bitcoin has the highest market share among virtual currencies, and securitization is considered to be quite influential. However, in 2019, the US SEC said that “Bitcoin is not a security”.

This view is not regulated or legally binding, but the SEC’s clear statement of this idea has had a major impact on the world. However, if the flow of securitization of virtual currencies accelerates in developed countries in the future, there will be similar movements for Bitcoin.

Bitcoin will continue to rise in price

Bitcoin ended its half-life in April 2020 and has been soaring since then. Compared to the price at the time of the half-life, the price has jumped more than twice, and it will likely continue to rise in the future. From here, let’s look at the factors.

Introducing Bitcoin to payment services

The collaboration between Rakuten Cash and Bitcoin became a hot topic in February 2021, and there is an increasing movement to use Bitcoin and Bitcoin Cash for payment services. 

If electronic payment services using Bitcoin become widespread worldwide, the value of Bitcoin will increase even more.

In this way, Bitcoin is expected to continue to grow as the virtual currency market expands. It will be necessary to trade appropriately while catching up on past information and the latest information.

Attention will be focused on the future of virtual currencies

I have explained the securitization of virtual currencies such as Bitcoin. There is still debate in the United States, but there is no doubt that American regulation will have a major impact on the world. Let’s keep an eye on the latest trends and get along well with cryptocurrencies.

Conclusion

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