Month: October 2021

Making property services slick with a click

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The shift to getting more things done online, driven by the pandemic, has also nudged the slow-moving property-related services in the government into a more citizen friendly one. There has been an acceleration in providing online access to citizens for various procedures, by various States (property is a state subject). From getting information such as circle rates to submitting forms and paying fees, departments at various levels are making it easy to get things done digitally.

You can check out services.india.gov.in and go to the “Housing and Property” section to access most of the online services available. You can also look at State Government websites such as eservices.tn.gov.in in Tamil Nadu. Only a few examples for the type of options available are covered here and it will be good to verify what else has been added through an online search.

Finding information

Property documents have been getting digitized over a long period. These public records are accessible to everyone to view and print. The coverage of the data varies between States and they also differ in what they make available on the internet.

Some data is available without providing any reference information. Uttarakhand for example gives information such as the size of land for all areas including rural areas in devbhoomi.uk.gov.in website. In Rajasthan, you can view and print Jamabandhi document for any piece of land online. The apnakhata.raj.nic.in site is in Hindi. In Maharashtra, the Mahabhulekh website (bhulekh.mahabhumi.gov.in) provides land record documents (known as 7/12 or Satbara Utara) and property card which gives the record of land ownership history.

Some data, such as verification, requires providing specific details or fees. For instance, you can get data on dues paid on a property by giving the property ID in Kerala’s land information site (erekha.kerala.gov.in). Karnataka’s land records site, karnataka.gov.in shows various property related data such as Record of Rights, Tenancy and Crops (for agriculture land), mutation register and status, once you provide reference information such as survey number.

Getting services

Various State governments are working towards digital land records that will enable end-to-end digital service and process – registration, transfers and mutations, duty payments, record modifications, verifications and reporting. Even now, you can get various services online.

The simplest one is getting an encumbrance certificate (EC). It gives information on monetary and legal liability of the property and is required by banks for a loan. This routine service can be availed online in Tamil Nadu by filling an online form with property specifics such as survey number in tnreginet.gov.in website.

Property tax payments – another recurring routine procedure – is also online in various municipalities and corporations. In Andhra Pradesh, cdma.ap.gov.in website provides a one-stop access to this. For others, such as in Maharashtra, it is distributed with nmmc.gov.in for Navi Mumbai, pmc.gov.in for Pune etc. In West Bengal, you can apply for mutation (change of ownership) and land-use conversion (say agriculture to residential) online. The wbregistration.gov.in site provides many services including certifying documents.

Other government permissions can also be sought digitally. For instance, in Karnataka, if you wish to purchase agricultural land for Industrial purpose, you can directly raise a request with the project details. Once the process is completed, you can also get the permission order copy electronically.

Need to do registration of a property and want an appointment? Haryana lets you check available slots in the next 60 days and book your time online. Delhi’s doris.delhigovt.nic.in shows that over 2.2 lakh documents were registered online in 2021.

In Punjab, pbindustries.gov.in website lets you apply for building plan approval, completion and occupancy certificates and many more. In Karnataka, you will also be able to notify any alterations to the property (such as change in area, tenancy change) and pay taxes.

Other services

With the implementation of RERA, nearly all States have a portal with the list of registered projects and agents. You can also file complaints online by providing detailed information, supporting documents and paying a fee. Delhi’s online property registration website also has a section to register grievances. In Haryana, lost property details can be reported at haryanapolice.gov.in with user registration.

Not just land and property ownership, rental related registrations are also online. One example is tenancy.tn.gov.in for Tamil Nadu. Likewise, you can access various government schemes such as housing grants online. Gujarat’s sje.gujarat.gov.in site provides access to urban and rural housing programs. In Tamilnadu, you can apply for housing board homes and track the status of your application with the tnhb.tn.gov.in website.

Greater Hyderabad’s website (ghmc1.ghmc.gov.in/Tax/calculationofpropertytax.asp) features online calculator for property tax. Many sites also provide a dashboard on process related information.

The author is an independent financial consultant

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Does clubbing of income save tax?

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A phone call between two friends leads to a conversation on the clubbing of income under the Income Tax Act. Those who have not yet filed tax returns for FY21, need to take note of these provisions.

Akhila: Hello! How’s life and work ?

Karthik: All well. I am trying to file my tax return and finish with this obligation by this weekend. I don’t want to wait till the extended December 31 deadline. You called me at the right time, actually. While it looks like I have no choice but to pay a fat tax this year, I was pondering over some ideas to save taxes in future.

Akhila: Is it? Shoot and let me tell you whether it will work or not.

Karthik: My total taxable income falls under the highest tax slab. I realised, just by excluding the interest income I earn on my fixed deposit from my total income, my tax slab can be a notch lower.

For this, I am planning to transfer this FD in the name of my kiddo now. Since he has no income, I can cut my tax outgo significantly from next year.

Akhila: Feel free to transfer the FD to your kid, by all means. But that will not reduce your tax burden. That interest income will continue to be taxable in your hands.

Karthik: Gosh!

Akhila: Thanks to genius tax planners like you, the Income Tax Act has an exclusive chapter that talks about clubbing of income.

Karthik: What genius? You just burst my bubble.

Akhila: Income earned by a minor child is clubbed with the income of the parent whose income is higher. Only if the minor child earns the income by way of manual work or application of his/her skill or talent, the clubbing will not come into picture. Since your kid won’t fulfil these conditions, the interest income will continue to be part of your taxable income or your wife’s.

Karthik: Uh, oh.

Can I at least transfer it in the name of my wife, who is currently earning lower than me, so that the tax will be a bit lower?

Akhila: Do you think the taxman wouldn’t have thought about it?

Karthik: Hmm…Of course, no. I was just trying my luck.

Akhila: Income from assets transferred to your wife, too, will be clubbed.

Karthik: Whoa! So basically, any income from assets transferred to my child or wife will be clubbed with my income, right? No escape route for me then…

Akhil: Mostly it does get clubbed in your hands, when the transfer is made without any consideration in return. This income has to be reported under Schedule SPI of the ITR.

Karthik: Got it.

Akhila: Remember, clubbing provisions will not apply on the income derived from clubbed income.

Karthik: Did you just utter a tongue twister?

Akhila: Ha-ha. Say, you transfer the FD to your son/wife. The interest income from that will be clubbed with your income. But if they invest the interest income somewhere, and your son/wife further earns an income from that, that income will not be clubbed with your income.

Karthik: Thank the taxman for small mercies.

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Things to remember when you dip into PF money

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Relatively higher returns than many other fixed income products, a sovereign guarantee backing and friendly tax treatment – make the PPF and EPF hugely popular. Even as market rates are quite low, the government left the interest rate on PPF unchanged in the latest quarterly revision last week. The interest rate has been left unchanged at 7.1 per cent since the June 2020 quarter. Likewise for the EPF – the interest rate on it was retained at 8.5 per cent for FY21, the same as that for FY20.

While from FY22, interest on employee contributions above ₹2.5 lakh into EPF is taxable, this threshold affects only a small population. Net-net, these instruments are unmatched vehicles for someone with a low risk appetite, without having to compromise on returns. However, the long lock-in that these instruments come with, is a negative. A PPF account has to be opened for a minimum of 15 years and can be extended in blocks of 5 years afterwards. As regards the EPF account, most people pretty much contribute to it throughout their work life.

What if you are faced with an emergency and want to dip into these savings? While you should ideally have other liquid investments for emergencies, knowing the rules on withdrawals from the PPF and the EPF help.

PPF

You can make premature partial withdrawals or even close the PPF account prematurely any time after five years from the end of the financial year in which you opened the account. Let’s suppose, you opened a PPF account in January 2017, that is, in FY 2017. Then, you can prematurely withdraw from or close your account only after five years from the end of FY 2017 (31 March 2017), that is, after 31 March 2022 or from FY 2023 onwards.

Premature withdrawal: While a premature withdrawal (unlike account closure) can be done for any reason, it is allowed only up to a certain limit. Your withdrawals cannot exceed the lower of the following – fifty per cent of the balance in your PPF account either at the end of the fourth year preceding the year of withdrawal or at the end of the immediately preceding year. Let’s take an example. If you want to make a withdrawal in August 2022 (FY 2023), then the maximum that you can withdraw is 50 per cent of the account balance as of March-end 2019 (FY 2019- end) or as of March-end 2022 (FY 2022-end), whichever is lower. A withdrawal can be made only once in a financial year.

Premature closure: This can be done only for specific reasons such as treatment of life-threatening disease for the account holder, his spouse or dependent children or parents; for expenses on higher education of the account holder or dependent children in a recognised institute of higher education or change in the residency status of the account holder. Any such a request must be backed by supporting documents.

In case of premature closure, the account will earn one percentage point lower interest than the applicable rate. This will apply for the entire period of the account. Partial withdrawals or a full withdrawal on premature account closure are not taxed.

EPF

In the normal course, you can withdraw your entire accumulated EPF balance on retirement after the age of 55. You are also allowed to withdraw up to 90 per cent of your account balance any time after turning 54 or within one year before your actual retirement, whichever is later.

Premature withdrawal: Premature withdrawal is permitted for reasons such as purchase / construction of a house, acquisition of a site for such construction, additions or substantial alterations to your house and repayment of loans in some cases, subject to certain conditions and limits. To be eligible, you must have held an EPF account for at least five years.

The withdrawal for purchase or construction of a house, for instance, must not exceed – the member’s basic salary and dearness allowance (DA) for thirty-six months OR the member’s own share of contributions, together with the employer’s share of contributions along with the interest OR the total cost of construction, whichever is lower. Withdrawals are also permitted for reasons such as illness in certain cases, marriage and post-matriculation education for your children. For this, you must have held an EPF account for at least 7 years.

Following the Covid outbreak, the EPFO additionally allowed subscribers to avail an advance of up to the limit of basic pay and DA for three months or up to 75 per cent of the EPF account balance, whichever is lower. The two Covid advances were announced in March-20 and May-21.

Premature closure: You can make a full withdrawal and close your account if you have been unemployed for two months since leaving your last job. As long as a complete withdrawal is made only after completing five years of service, there are no tax implications.

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2 Stocks To Buy For Long Term Investors According To Motilal Oswal

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Buy Piramal Enterprises stock, says Motilal Oswal

According to Motilal Oswal over the past two years, Piramal Enterprises has strengthened its Balance Sheet by running down its Wholesale loan book, reduced the top 10 exposures, brought equity capital into the company through multiple means, improved the texture of its borrowings by reducing CPs, and e) fortified itself against contingencies, with ECL provisions at 5.8% of assets under management.

“Product diversification within Retail would help the company deliver strong growth and lower concentration risk. We expect the Financial Services business to deliver 2.3% RoA/10% RoE over the medium term (post building in the DHFL acquisition). We have maintained our target multiple of 1.8 times for the Financial Services business. Using Sum of The Parts, we arrive at target price of Rs 3,150 per share (Jun’23E based). We maintain our Buy rating on the stock of Piramal Enterprises,” the brokerage has said

Buy Jubilant Foodworks stock for a 20% upside

Buy Jubilant Foodworks stock for a 20% upside

According to brokerage firm Motilal Oswal, the Jubilant FoodWorks stock has an upside potential of nearly 205 from the current levels. The company recently acquired 32.81% stake in DP Eurasia in Feb’21 via its wholly-owned subsidiary: Jubilant Foodworks Netherlands. It is the exclusive master franchisee of the

Domino’s Pizza brand in Turkey, Russia, Azerbaijan, and Georgia.

According to Motilal Oswal as of March’21 Jubilant FoodWorks, has a robust Balance Sheet, with cash and cash equivalents of Rs 6.2 billion. While Jubilant FoodWorks subsidiary – JFN – has a short-term borrowing facility in place to fund the DP Eurasia acquisition, it would not be a stretch on Jubilant FoodWorks Balance Sheet. The increase in stake would give the company better control to steer the strategy of respective companies and replicate its success story from India.

Disclaimer:

Disclaimer:

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and investors should exercise some discretion, given that the Sensex is near the 60,000 points level.



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Term insurance premium set to rise as reinsurers tighten norms due to pandemic

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The term insurance premium is set to rise by anywhere between 15 per cent to 40 per cent after reinsurers tightened underwriting norms in the wake of the Covid-19 pandemic.

While Munich Re has tightened underwriting norms, GIC Re had hiked rates earlier this year.

“GIC, which is our reinsurance company, had hiked rates in March and it came into effect from April. While till now we have not passed on the increased rates to customers but now we feel the need to increase rates on term plans taking into consideration our profitability. We will be increasing our rates on the term side this calendar year in the range of 15 to 20 per cent, depending on age, sum assured and quality of life of the individual,” said Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance.

Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance, pointed out that over the last 18 months of the pandemic, and especially during the second wave, reinsurers have been badly hit by the surge in claims, and there has been a lot of pressure on them to hike rates.

“We estimate that term plan prices are likely to rise by around 20 per cent to 40 per cent across the board. However, the exact rise will vary from company to company, and from reinsurer to reinsurer. It will also depend on the amount of business that the life insurance company does with the reinsurer,” he said.

Wait and watch mode

Meanwhile, some life insurers are still on a wait and watch mode in the expectation that reinsurers’ rates would come down later once the pandemic passes in six months to a year.

While the pandemic has increased awareness and demand for life insurance products, particularly term life products, insurers have also paid out high claims, especially after the second wave of the pandemic. Claims for the sector in the second wave were up by two to three times of the first wave of the pandemic.

“The life insurance sector witnessed significant claims in the first quarter of the fiscal due to the second wave of the pandemic and profitability suffered as companies made provisions or reserves to alleviate the impact of the claims,” Care Ratings had said recently, adding that the life insurance premiums are expected to witness significant movement over 2021-22.

However, key risks such as a delay in the economic recovery and resurgence of Covid cases with a third wave could negatively impact premium growth, and rise in term plan premium rates.

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CBDCs are designed to be very stable: IMF

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“About 80–100 Central Banks around the world, including in G20 nations, are exploring central bank digital currencies (CBDC) and are in some sort of pilot or testing stages,” said Tobias Adrian, Financial Counsellor and Director – Monetary and Capital Markets Department, IMF at the Global FinTech Fest.

The three-day Fest, which concluded on September 30, was attended by over 26,000 delegates from 121 countries. Policymakers, technocrats, investors, founders, economists, bankers, participated in the Fest. The event was organised by National Payments Council of India (NPCI), Fintech Convergence Councill (FCC), and Payments Council of India (PCI) of Internet and Mobile Association of India (IAMAI).

Differ from bitcoin

“CBDCs are designed to be very stable, stable in value, with a low transaction cost and backed by the Central Bank for added consumer confidence, very different from bitcoins which fluctuate in value and are more like an investment asset,” Tobias Adrian said.

Also see: The time for central bank digital currencies has come

There could be a lot of innovations in Central Bank issued digital currencies, especially across payments and lending platforms.

“CBDCs could indeed be somewhat similar, not necessarily the same, to bitcoin assets, could be based on blockchain technology, could be available in wallets. It depends on whether the design is based on existing payment systems or using very powerful blockchain technologies,” he added.

Drawbacks

Meanwhile, he warned that cybersecurity could be a major challenge for CBDCs. “You need to make sure that the system is resilient against cyberattacks.” It’s not the technology alone, but the intersection of technology and human.

Also see: Central bank digital currency can boost innovation in cross-border payments: RBI Deputy Governor

Secondly, CBDCs might undermine existing banks so banks need to upgrade their technologies to compete.

Finally, the lack of universal cellphone access may limit CBDC penetration.

On expensive cross-border payments, Adrian envisioned that cross-border transfers would be a lot cheaper for a small amount of payments. There are some wallet exchanges available that allow one to convert US dollar into rupee stable coin, with an implicit fee that is cheaper. However, there are a lot of discussions going on between Central Banks of various countries to make cross-border payments cheaper.

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Indian Gold Rates Can rise In October Even As USA Inflation Rises To 30 Years High

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Personal Finance

oi-Kuntala Sarkar

|

October gold prices started to gain since Thursday this week, after a 3 months low range and it was expected that the first week of October might be following this trend. But the USA’s Core Personal Consumption Expenditure (PCE) reports, August came out on Friday showing a sharp rise in inflation at 4.3%. It is their highest inflation figure in the last 30 years, since 1991. So, the international gold rates are going to impact intensely as this inflation hike can force US policymakers to maintain the status quo in their monetary policy. This can help the gold prices to gain further.

Indian Gold Rate Can Rise In October Even As US Inflation Rises To 30 Years High

The Core PCE is preferred by the US Federal Reserve, as they think it is a more accurate measure of inflation than the CPI. PCE tacks “a broader range of goods and gives more weight to substitution – when consumers buy a cheaper product to substitute for a more expensive one”. The US Fed Chair Jerome Powell’s earlier dovish sentiment can be in-depth again. USA’s target to keep the inflation rate around 2% failed in August, and this data will restrict them from increasing the interest rates soon or halt them from taper the liquidity infusion on large scale. So, the gold prices can rise again to the $1780 level, approximately. Investors will be again taking shelter under gold. The precious metal is a hedging tool for investors against inflation. Gold rates are likely to gain with higher inflation, beating equities or bonds. Hence the gold traders can think of it as a silver lining now, although common buyers are going to lose.

Last traded prices

Today, on Saturday, the spot market and futures markets are closed. Till Yesterday, on October 1, gold prices in the Comex December futures stayed around $1760/oz and spot gold prices reached even $1765/oz at some point. MCX October gold future also rose to Rs. 46,500 yesterday, till last traded. If this bullish sentiment works again on Monday, the market might get to cross this range and be at $1800/oz. According to experts, “The $1,750 level is now a support, and $1,800 is resistance.” In India, 22 carat gold was quoted at Rs. 45,470/10 grams and 24 carat gold was quoted at Rs. 46,470/10 grams, till yesterday.

Market volatility

However, the Indian gold market is going to stay quite volatile this month. Although the prices are rising now, any time the situation can flip. Because apart from the US PCE data, traders are concerned about November Fed meet. Traders, in the last week of October, will be busy anticipating the US tapering timeline. Tapering can drag down the gold rates.

India imports gold from foreign markets, so Indian gold rates depend on International prices. If the gold prices rise in the international markets this month, the domestic gold markets will walk on the same path. So, it will be a good time for Indian gold jewellers ahead of the festive season. The India Bullion and Jewellers Association (IBJA) was trying to keep the gold prices strong now, as the gold purchase increases considerably during the festive seasons. People buy gold substantially for marriage or other auspicious occasions, and poor gold rates could have doomed their business. However, the common buyers will have an added pressure on the prices.

Story first published: Saturday, October 2, 2021, 12:36 [IST]



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This Company IPO Has Unique Business Model On The Cusp Of A Large Opportunity

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Investment

oi-Sunil Fernandes

|

Motilal Oswal Institutional Equities recently analyzed Nykaa’s DRHP to understand the opportunity in the BPC and Fashion segments, the company’s business model, and the competitive landscape. The company is likely to come-up with an IPO shortly and Motilal Oswal institutional Equities believes the company has a unique business model on the cusp of a large opportunity.

This Company IPO Has Unique Business Model On The Cusp Of A Large Opportunity

Large market opportunity

The brokerage conducted an online survey among the target demographics and presented its findings. According to the same, the Indian Beauty and Personal Care (BPC/Fashion market is expected to reach Rs 2t/Rs 8.7t by CY25 – posting a CAGR of 12.7%/18% from CY20. The online BPC and Fashion markets are growing at an even faster pace.

“While online channels account for just 8% of India’s BPC market, it is pertinent to note that 70% of the market is estimated to be unorganized. Thus, online channels are estimated to contribute 27% to the organized space, and Nykaa is well-placed to lead the online/organized portion of this market growth with a proven business model,” the brokerage has said.

According to Motilal Oswal one of Nykaa’s key strengths lies in its inventory-led business model for the BPC segment. “While it assumes the risk of obsolescence and bears an inventory cost, it allows the company to offer authentication for all its products, ensure availability, and enable efficient distribution. Its technology is geared to enable fungible inventory across onlineand offline channels, allowing for efficient inventory management. As seen from our survey responses, the widespread availability of spurious products is a concern among online BPC consumers. Accordingly, a guarantee of authenticity offers comfort to customers,” the brokerage has said.

Influencer network

With a network of over 1,300 influencers and 12.6m followers across leading social media platforms, Nykaa is able to drive widespread product and influencer-led education through creative and entertaining content across video and written formats.

“Nykaa creates and films the majority of its content in-house through the Nykaa Army. Moreover, it leverages influencers on a large scale through the Nykaa Affiliate Program, enabling external content creators to publish content on their behalf across several digital platforms. Endorsement by well-known influencers further strengthens the trust in the platform,” the brokerage has said.

The pricing and the date of the IPO is not known, but, if you go by the Motilal Oswal report and the markets at record peaks, even this IPO should get a solid response.

Story first published: Saturday, October 2, 2021, 9:52 [IST]



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5 Hybrid Funds With Good Ratings For SIPs When Markets Are At A Peak

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Why you should start SIPs in conservative hybrid funds?

As an SIP investor, the one thing that you want to do is generate returns and protect your capital. Those who have invested in SIPs largely through largecap, midcap, small cap and flexi cap funds have gained whopping returns in the last few years.

Now, with the Sensex at nearly 60,000 points, you are buying into an SIP at a whopping 50,60, 70 and maybe 100 per cent higher NAV than what was prevailing a year ago. It’s time to now look at hybrid funds, which have a conservative approach, in a sense they might invest moderately through equity, with a large exposure to debt. Conservative hybrid funds invest roughly a quarter of the money in equity shares and the rest in bonds. The Sensex at nearly 60,000 points is offering very little value and most stocks have gone-up significantly.

A few hybrid funds to consider for starting SIPs

A few hybrid funds to consider for starting SIPs

We see little point in investors continuing their SIPs in 100% equity mutual funds, as you would continue to be buying units at a higher NAV. Here are a few conservative Hybrid funds to consider, which are rated No 1 and No 2 by CRISIL in the conservative hybrid category.

CRISIL rating 1-year returns
Canara Robeco Conservative Hybrid Fund No 1 14.76%
LIC MF Debt Hybrid Fund No 1 8.67%
Kotak Debt Hybrid No 2 19.64%
HSBC Regular Savings Plan No 2 12.44%
Franklin India Debt Hybrid Fund No 2 13.38%

Once markets fall, there maybe an opportunity to change the approach again and move money to pure equity funds. A recent report by one of the top brokerages in the country suggested that the Sensex is trading a premium of almost 20% to long-term averages. This means equities are turning expensive and with interest rates across the globe headed higher, we might see equities continue to under perform, given where the markets are.

Disclaimer:

Disclaimer:

Investing in mutual funds poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and investors should exercise some discretion.



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Crypto assets pose financial stability challenges: IMF report

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The rapid growth of the crypto ecosystem presents new opportunities, the IMF has said, but also cautioned that the digital currency assets pose financial stability challenges. Cryptocurrencies are digital or virtual currencies in which encryption techniques are used to regulate the generation of units and verify the transfer of funds, operating independently of a central bank.

“The rapid growth of the crypto ecosystem presents new opportunities. Technological innovation is ushering in a new era that makes payments and other financial services cheaper, faster, more accessible, and allows them to flow across borders swiftly,” it said in a chapter of its latest report Global Financial Stability Report.

Innovative financial services

Crypto asset technologies have potential as a tool for faster and cheaper cross-border payments. Bank deposits can be transformed to stable coins that allow instant access to a vast array of financial products from digital platforms and allow instant currency conversion, said the IMF in its chapter titled The Crypto Ecosystem and Financial Stability Challenges.

Decentralised finance could become a platform for more innovative, inclusive, and transparent financial services, it added.

Volatile currency

“Despite potential gains, the rapid growth and increasing adoption of crypto assets also pose financial stability challenges,” the IMF said.

In a recent interview with PTI, Tobias Adrian, the Financial Counsellor and Director of the Monetary and Capital Markets Department of IMF, said that Bitcoin could lead to instability because it is extremely volatile. It was trading above 65,000 earlier this year, and then it came down to below 30,000.

“It might go back up, it might go back down. So if you’re a merchant, and you’re quoting in Bitcoin, you’re exposed to this massive volatility. It is much more volatile than equities or commodities or even exchange rates. It’s a very, very volatile asset, and that is introducing instability,” he said.

“It’s fine as an investment asset. But as a monetary aggregate, it just doesn’t have the right properties,” he added.

Also see: Indian cryptocurrency market likely to reach up to $241 million by 2030: Nasscom

“And let me just add two more problems with that. One is that transaction costs can be fairly expensive and compared to digital money, as it’s the case in India for example, where you have a real-time gross settlement payment system, it’s actually slow because it’s a distributed ledger, and to know that the transaction has gone through, it has to be verified on all of these different computers. So, it’s not that instantaneous, and it can be expensive to transact and it’s extremely volatile. It doesn’t have the properties that you want money to have,” Adrian said.

Destabilise capital flows

The IMF in its report said that challenges posed by the crypto ecosystem include operational and financial integrity risks from crypto asset providers, investor protection risks for crypto-assets and DeFi, and inadequate reserves and disclosure for some stable coins.

“In emerging markets, the advent of crypto assets has benefits but can accelerate cryptoisation and circumvent exchange and capital control restrictions. Increased trading of crypto-assets in these economies could destabilise capital flows,” it said.

Need for regulation

“Policymakers should implement global standards for crypto-assets and enhance their ability to monitor the crypto ecosystem by addressing data gaps. As the role of stable coins grows, regulations should correspond to the risks they pose and the economic functions they perform. Emerging markets faced with cryptoisation risks should strengthen macroeconomic policies and consider the benefits of issuing central bank digital currencies,” the report said.

Also see: China declares all cryptocurrency transactions illegal

In a joint blog post, three IMF officials Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou wrote that as crypto assets take hold, regulators need to step up.

“Crypto-assets offer a new world of opportunities: Quick and easy payments. Innovative financial services. Inclusive access to previously “unbanked” parts of the world. All are made possible by the crypto ecosystem,” they wrote. “But along with the opportunities come challenges and risks,” it added.

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