THE IMPLICATIONS OF LAWS IN CASE OF CROSS BORDER TRANSFER AND INTERNATIONAL FINANCIAL FLOWS OF CRYPTOCURRENCY

Abstract

The implications of laws governing cross-border transfers and international financial flows of cryptocurrency are multifaceted and significant. This paper explores key aspects of these implications, including regulatory fragmentation, anti-money laundering (AML) and know your customer (KYC) compliance, taxation, challenges posed by capital controls, and the importance of international cooperation and standards. Cryptocurrency regulation varies widely across jurisdictions, leading to regulatory fragmentation that complicates cross-border transactions. AML and KYC regulations aim to mitigate risks associated with cryptocurrency transactions, but compliance requirements differ between countries, increasing complexity and costs for businesses and individuals. Taxation of cryptocurrencies varies globally, with cross- border transactions potentially triggering tax liabilities in multiple jurisdictions. Cryptocurrencies challenge traditional capital controls by enabling borderless transfers, prompting regulators to respond to maintain monetary sovereignty. International cooperation among regulatory authorities and organizations such as the Financial Action Task Force (FATF) is essential to develop consistent regulatory frameworks and standards for the cryptocurrency industry. Cryptocurrency or virtual currency gained immense popularity after the 2008 financial crisis. This paper argues that instead of imposing a blanket ban on use or possession of cryptocurrency, appropriate regulatory framework would be a more suitable alternative. This regulatory framework maybe brought in by making suitable amendments to the existing legislation or by enacting a novel suigeneris legislation altogether. Furthermore, this short paper focuses on only one aspect of such regulation, namely, cross-border transactions through cryptocurrency. It is pertinent to mention here that though cryptocurrency is difficult to define and no universally accepted definition of cryptocurrency exists, however, cryptocurrency for the purposes of this paper would mean a financial instrument in intangible form produced and stored on servers using blockchain technologies and does not include digital currency or electronic currency like digital wallets, prepaid credit top-ups, loyalty points, etc.