Are Bitcoin exchanges turning into haven for tax evaders?

Are Bitcoin exchanges turning into haven for tax evaders?

Did leakage of Panama and Paradise Papers encourage tax evaders to put their unaccounted money in Bitcoins all over the world?

Did leakage of Panama and Paradise Papers encourage tax evaders to put their unaccounted money in Bitcoins all over the world? Today, no currency in the world is making so many headlines than the cryptocurrency. A single bitcoin costs around $18,000( approx Rs 11 lakh) - making it one of the costliest currencies in the virtual world.

Technologists and experts have various reasons to analyse and criticize the fluctuation, but in India, Vijay Mukhi - one of the pioneers of the Indian IT industry have claimed that Bitcoin Exchanges (especially in tax haven countries) are becoming a "new platform for concealing the black money of high networth individuals (HNIs), businessmen and all criminals who loves to evade taxes."

For years, Mukhi has been the one of the first to teach emerging technologies in India, with more than 80 technical and non-technical books under his names. Of late, Mukhi has penned down a 900-pages voluminous book on Bitcoins, titled, "The undocumented internals of the Bitcoin and Ethereum Blockchains", available on Internet.

While talking exclusively with, Mukhi, without mincing words said, "Bitcoins is the biggest ponzy scheme of the Universe." He has warned the Central Government and Reserve Bank of India (RBI) that black money is going into Bitcoins in huge numbers.

"Earlier, all unaccounted money was going into purchase of gold or properties or both, leaving behind a paper trail. But if one puts his money in cryptocurrency, then nobody knows who the real owner is. Hence, bitcoins are the easiest way to evades taxes", Mukhi said.

Let's see the available data. In April 2013, price of single bitcoin was Rs 7,304. The same bitcoin jumped to Rs 6,26,400 in November 2017.

And now, in December 2017, the price of the same cryptocurrency touched Rs 11,00,000, a whopping increase of almost 9000 per cent in last four years.

Zebpay claims to have 50 per cent market share of entire Bitcoin Exchange space in India. Data shared by Zebpay to gives some interesting aspects of Bitcoins in India. As per the data:

  • The bitcoin industry is adding an overall number of two lakh users a month in India.
  • Currently, there are around two million users, pan-India
  • The industry volume is about Rs 2000 crore, a month
  • Total trade in India for bitcoin goes to approximately Rs 10,000 crore to Rs 20,000 crore, annually
  • Globally, bitcoins in particular, the trade volume goes an approximate Rs 30,000 crore to Rs 50,000 crore per day.
With such returns, Bitcoin has emerged as a new attraction among global investors.

Mukhi has reasoned out two factors: One is the effect of Prime Minister Narendra Modi's demonetisation process, and second the impact of Panama and Paradise Papers expose.

Mukhi said, "When Modi implemented demonetisation, none of them realized that we were among the top ten in the world to bring in these changes. World-over, all rich and criminals thought what would happen if in United States (US) stops Dollar as its legal tender. What about Europe? That's the reason money started flowing into cryptocurrency and valuation had no limits."

He continued, "When Panama Papers came out, nobody took it seriously. But when Paradise Papers got exposed, tax evaders got scared that if they have cash or money in bank account in any offshore island, it would be easily trailed. So, if one analyses the sequence of events, the price of bitcoins suddenly increased in last 2-3 months".

But, Zebpay thinks other way around. While talking to, Sandip Goenka, co-founder, Zebpay claimed to follow complete KYC norms, strictly.

"Every single person buying or selling bitcoin on its exchange have to provide identification details such as: Aadhar or Pan Card. Bitcoin is not illegal as per the existing laws. Moreover, Zebpay is also a registered entity by Registrar of Companies (RoC) and a self-regulator, which operate only by bank accounts", Goenka said.

Why prices are increasing, suddenly? Goenka explained, "Bitcoins are precious and limited in supply. There would be only 21 million bitcoins to exist. Right now, 17 million are in circulation. So, as the demand of bitcoins in each and every country going up, the prices would increase by same pace".

Mukhi has suggested the government not to ban the cryptocurrency as it may go underground, and still remain operational. "In fact, the central government should implement demonetization 2.0 to stop the flow of black money moving towards bitcoins", Mukhi concluded.

However, the Indian exchanges are assuring complete transparency and support to the investigators, if any suspect comes on radar. But in between, lays the investor - for whom it is a very speculative and an unregulated market. Money should be invested in bitcoin only if the investor is familiar with the technology and the risk involved.