The crypto ecosystem has recorded a milestone in integrating itself into global finance, with the first Bitcoin- based exchange traded fund (ETF) having debuted trading on the Wall Street. This means the completely unregulated Bitcoin is getting a regulatory interface in the sense the ETF market is subject to all regulations. The development is watched with keen interest in India, which is supposed to be one of the most active cryptocurrency markets,
although the decentralised digital currency is yet to receive recognition here.

More interestingly, the crypto-based futures ETF started trading on the Wall Street as the second most heavily traded fund. The fund launched by ProShares rose about 5 percent and more than 24 million shares changed hands on the first day, according to media reports.
Only a BlackRock carbon fund had notched up higher volumes on debut.

The new fund, of course, does not mean investors who buy the units would be owning the whole or a piece of Bitcoin, because the futures bet on the volatility of the crypto currency. Bitcoin price keeps fluctuating on a daily basis. It touched a record high of $65,000 this week, but had been down to the

$40,000-level just about three weeks ago.

The newly floated fund gives investors the opportunity to get involved with the decentralised digital currency system even without opening a cryptocurrency account as they can buy the units like they would do with any regular ETF. To that extent, the development means a certain level ofintegrationbetween the two systems, generally considered irreconcilable with each other.

New developments in the decentralised ecosystem have been pointing to its greater integrationwith the legacy order. A municipal corporation in the US has even decided to pay its employees in digital currency, which they can use to make day-to-day transactions at a number of outlets or exchange into fiat currency and then use accordingly.

Mainstream financial institutions have increasingly been getting involved with cryptocurrencies, some ofthem offering even formal exchanges wherecryptos can be converted into fiat currencies. The blockchain technology that drives the digital currency is finding ready acceptance
even by central banks, which the cryptocurrency ecosystem hopes to replace at some point of time and as such there is an inherent conflict of interest between the two.

The approach of the government of India as well as the Reserve Bank of India on the issue has been marked by extreme swings. At one point of time, the RBI had come down heavily on cryptocurrencies, banning banks from dealing with the crypto players or offering any kind of banking service to the new system. But later on, the authorities even considered the issuance of India’s own official cryptocurrency.

The latest approach is reportedly in favour of introducing some kind of regulation so thatthe newsystemwill operate with certain minimum discipline. According to a proposal under the government’s consideration, cryptocurrencies will be treated as anasset or commodity for all purposes, including taxation and as per user case, whether for the purpose of payments, investment or utility.

Reportedly, a bill is being prepared incorporating various provisions applicable to virtual currencies. These could perhaps categories
cryptocurrencies on the basis of the technology they use or their end uses, which will make it possible to bring themunder regulation and even taxation. The government has realised that the decentralised digital currency ecosystem has grown to become too big to be made illegal. Bracketing it with commodities will make it possible to bring crypto assets under the taxation net and consider earnings as business income which canbe taxed at normal income tax rates, just like any other earning.

According to domain experts, there are more than 5,000 different cryptocurrencies, each with its own different legal characteristics. This is what prompted the government to consider all currencies in the same way and define them on the basis of end-use criteria, and tax accordingly.

The new euphoria has, however, not come without criticism. There are conservatives who believe that the majority of cryptocurrencies are worthless and will fail, leaving a large number of investors holding the bag while a privileged few would make a killing. They even predict the repeat of a dot-com like bubble of the 1990s as most of the currencies are nothing more than garbage.

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