Government discusses Bitcoin: Will it play the spoilsport?

Mail Today Bureau   New Delhi     Last Updated: June 28, 2017  | 09:24 IST
Arun Jaitley looks into the bitcoin problem

Finance minister Arun Jaitley held an inter-ministerial meeting on Tuesday to weigh risks related to virtual currencies (VCs) like bitcoins.

Although several issues concerning bitcoins were discussed, no decision was taken, sources said.

The meeting was attended by IT minister Ravi Shankar Prasad, NITI Aayog vice chairman Arvind Panagariya, home secretary Rajiv Mehrishi, economic affairs Secretary Tapan Ray, financial services secretary Anjuly Chib Duggal and other senior officials.

The government has been debating over issues concerning bitcoins. Last month, it sought public opinion on allowing virtual currencies.

The circulation of VCs has been a cause of concern among central bankers the world over for quite a while now. Reserve Bank of India had also cautioned the users, holders and traders of VCs, including bitcoins.

How are Bitcoins created?
 
Unlike paper currencies, Bitcoins cannot be minted, they can only be mined. There are only 21 million bitcoins that have been created.
 
At present, only 16.8 million or 80 per cent of all the bitcoins have been mined.
 
How to buy Bitcoins?

 
You can look for various digital currency exchanges to buy bitcoin.
 
You can purchase Bitcoins with a credit card. Coinbase.com and Coindesk.com are the most popular exchanges. They also offer tutorials on digital currencies.
 
In India, you can purchase Bitcoin from Zebpay exchange. Zebpay has Android and iPhone app which lets you link your bank account for quick transfers.
 
You can buy Bitcoins by making a payment to Zebpay's bank account. You can also withdraw the money to your bank account, and track data on Bitcoin valuation in the country.
 
There is a KYC requirement and you need to verify your ID by simply clicking a photo of your PAN card.
 
Unocoin, another India-based exchange, lets you trade Bitcoins. They can help you buy, sell, store, use and accept bitcoin.
 
The company claims it has over 1,50,000 customers.

 With Prime Minister Narendra Modi-led government going the whole hog to make India a less cash economy, digital cryptocurrency has caught the attention of many Indians.
 
Post demonetisation, leading Bitcoin exchanges in India witnessed a rise in user base by up to 250 per cent.
 
Sathvik Vishwanath, CEO of popular bitcoin wallet Unocoin had told BT that after demonetisation demand from India has increased manifold.
 
Sandeep Goenka, CEO of Zebpay, one of the largest bitcoin exchanges in the country had said, "Indians are enquiring about bitcoins as an alternative and safe investment option. They are downloading Zebpay as they want to experiment with digital currencies. There has been a 50% increase in Zebpay downloads."

To be able to store Bitcoins, you'll need a wallet which can be in your computer or smartphone. You can back up the wallet at another location so that you don't lose data if your hard drive crashes. Depending on your requirement, you can choose a wallet.
 
How much returns can you get if you invest in Bitcoins?
 
The decentralized virtual currency that took the world by storm has witnessed a 300 per cent rise in value in just one year. Its value hit an all-time high when Japan passed a law to accept bitcoin as a legal payment method.
 
Despite RBI's reluctance to recognize the cyptocurrency, the interest in Bitcoins in India has not waned. After Prime Minister Narendra Modi's demonetisation move, Ahmedabad-based bitcoin trading start-up Zebpay witnessed a 25 per cent surge in revenue.
 
Unocoin, another bitcoin trading firm which had received funds from Blume Ventures, saw a threefold rise in its user base to 1,20,000 following demonetisation.

Value of Bitcoins may not come down as there are limited number of Bitcoins and everyday more and more people are showing interest in investing in the cryptocurrency.
 
Are Bitcoins legal in India?
 
Even as economies like Japan and Russia move to legalize the use of Bitcoins, India, despite being at the cusp of a digital revolution is yet to officially recognize the cryptocurrency.
 
India's central bank, the Reserve bank of India or the RBI, which regulates Indian rupee, had earlier cautioned users, holders and traders of Virtual currencies (VCs), including Bitcoins.
 
"The creation, trading or usage of VCs including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities," the central bank had said.
 
In March, RBI Deputy Governor R Gandhi warned against crypto-currencies such as Bitcoin. "They pose potential financial, legal, customer protection and security-related risks," Gandhi said. "Payments by such currencies are on a peer-to- peer basis and there is no established framework for recourse to customer problems, disputes, etc. Legal status is definitely not there," he added.
 
However, the central bank hasn't unequivocally banned Bitcoins in the country.
 
Blockchain, the technology behind Bitcoin
 
Although Bitcoin is yet to become mainstream in India, the underlying technology behind it, the blockchain technology has caught the attention of several Indian banks. Last year, ICICI Bank announced that it successfully executed transactions in international trade finance and remittances using blockchain technology.


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