One good thing about gambling is you can be a millionaire overnight. But the worse part is that you wouldn’t even know when and how you were suddenly thrown out on the road with literally nothing in hands. Scores of cryptocurrency investors who had put their money in Terra (Luna) witnessed the latter situation recently as one of the top cryptos of the world lost nearly 100 per cent of its value within a few days.
Just before the crash, Terra (Luna) ranked among top 10 cryptocurrencies on CoinMarketCap, with each of its token trading at around $85. However, by 11th May 2022, Luna crashed to $15 and within the next 48 hours it lost almost 100 per cent of its price value. Interestingly, Terra (Luna) didn’t go down alone. It rather tanked the entire crypto market.
In what was literally a bloodbath in crypto markets, Terra’s algorithmic stablecoin TerraUSD (UST) lost it peg to the dollar and is presently trading at just $0.0761. Meanwhile, prices of Bitcoin, Ethereum, Solana, Cardano, Matic, Polkadot, XRP, BNB and several other top cryptos also crashed to massive lows and they are still struggling hard to recover, with experts saying price recovery cannot be expected so soon.
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Interestingly, or rather worryingly for the nascent crypto industry in India, the Terra debacle and associated crypto market crash appear to have given weight to the Government of India’s intended move to treat cryptocurrencies as equivalent to gambling (for taxation).
“Yes, this (crypto crash and Terra debacle) has fueled the notion that crypto is nothing but a gamble to those who do not believe much in crypto future,” Dileep Seinberg, founder and CEO of MuffinPay, a crypto fintech company, told FE Online.
Recently, reports said that the Government of India was viewing crypto at par with lottery, casinos, betting, gambling and horse racing, for taxation purpose. All of these activities attract 28 per cent GST on the entire value plus 3 per cent in case of Gold.
However, crypto industry insiders say it won’t be justified to treat crypto as gambling as it has many practical use cases.
“Terming Cryptocurrencies as gambling is not justified where it is compared to risky assets like stocks and commodities. The sole reason for such a speculation is due to less liquidity as fewer people have migrated into web3. More regulations in the Crypto space are welcomed to avoid situations like the Terra Luna debacle but gambling is indeed not the right term to define it,” Om Malviya, President, Tezos India, told FE Online.
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Malviya further said that Luna was one unfortunate scenario which was amplified by irresponsible influencers and VCs, who certainly have resources to know better.
“But at the end, there are fundamental values to cryptocurrencies like Store of Value, Remittances, DeF, NFTs, Web3 Games,” he added.
Regulations welcome
The US government has proposed the Stable coin TRUST Act, clarifying how a stable coin should function and adhere to a few significant guidelines.
“This will be long term beneficial for the Crypto world. Probably the most crucial step to realise the power of cryptos being stable. In this similar model, I believe other governments will also make reasonable regulations protecting people’s interests. Good regulations will fuel crypto innovation and exemplary projects for the market,” said Seinberg.
(Cryptos including Bitcoin and other virtual digital assets are unregulated in India. They are considered extremely risky for investment. Please consult your financial advisor before making any investment decision)
