Despite the ban in several countries such as Russia, bitcoins seem to be doing brisk business in India.
Bitcoins are digital currency not supported by a country’s government or central bank. Also known as crypto-currency, they can be traded for services or goods with sellers who accept bitcoins as payment.
While the bitcoin prices in the last decade have been volatile, the current surge seems sustainable, according to industry experts. There are several players in the market such as digital currency and payment network Unocoin, Zebpay, BTCXIndia and Coinsecure.
Unocoin, which has tied up with over 2,00,000 merchants worldwide, sees around 200-250 trades a day. From flight tickets, bus tickets to vouchers from e-commerce majors such as eBay, Flipkart, Snapdeal, Unocoin offers several options to users.
From advocating caution in use of this digital currency in the past, the government has recently announced the setting up of a committee to examine the existing framework on digital currencies. Concerned over the adverse impact of virtual currencies such as bitcoin on the consumer, the government is planning to look into ways of regulating the fast-growing segment to curb money laundering.
The Digital Asset and Blockchain Foundation of India (DABFI) jointly set up by India-based bitcoin startups Zebpay, Unocoin, Coinsecure and SearchTrade has urged the government to allow them to showcase the benefits this technology can bring to India.
DABFI is a self-regulatory body that attempts to lay down regulatory regimes for the digital currency businesses in the country. It seeks to actively create and propagate best practices that digital asset businesses must follow in India based on consultations with industry, regulators and other stakeholders.
The government’s move comes amid apprehension that black money hoarders may have resorted to virtual currencies and bitcoins to launder their cash after the recent demonetisation drive. The committee have been asked to suggest measures for dealing with virtual currencies including issues relating to consumer protection and money laundering, the finance ministry said in a release.
“The Committee will (i) take stock of the present status of Virtual Currencies both in India and globally; (ii) examine the existing global regulatory and legal structures governing Virtual Currencies; (iii) suggest measures for dealing with such Virtual Currencies including issues relating to consumer protection, money laundering, etc; and (iv) examine any other matter related to Virtual Currencies which may be relevant,” the government release said.
The DABFI, on the other hand, have issued a statement: “We have seen that in countries where governments have come out with a self-regulation policy, created an environment for the bitcoin/ blockchain technology to grow, those countries have become the epicentre for innovation. Investments have started pouring in and next generation, new edge technology developments, user-friendly products and a new breed of entrepreneurs have developed”.
“We request the committee to give us an opportunity to meet them and showcase the benefits of this technology for our country. Financial inclusion, cheaper cross-border remittance, full trace and track on the movement of value on the blockchain network, and the potential for India to become a financial hub are key benefits that can be derived using virtual currencies.”
Currently, use of virtual currencies such as bitcoins are not authorised by the Reserve Bank of India (RBI) and could result in breach of anti-money laundering provisions. The RBI has cautioned users, holders and traders of virtual currencies in India, including bitcoins, about the potential financial, legal and security risks arising from their usage.
“The absence of counter parties in usage of virtual currencies, including bitcoins, for illicit and illegal activities in anonymous/pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism laws,” Minister of State for Finance Arjun Ram Meghwal has said.
The creation of virtual currencies such as bitcoins as a medium of payments is not authorised by any central bank or monetary authority. “No regulatory approval, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities,” he said.
The RBI has additionally warned that any user, holder, investor and trader dealing with virtual currencies would be doing so at his/her own risk.
So will the technology manage to make inroads in India? The startups seem confident that bitcoins are here to stay.
The government committee has been tasked to submit its report within three months. So the jury is still out on that one.
