The value of one Bitcoin is $2,808 now and Rs 1,82,704 in Indian rupees. Is there any underlying asset against it or anyone given legal guarantee on value? No. Then, why Bitcoin price which was less than $500 a year back, has increased nearly 6 times? Similarly, one Bitcoin cost about Rs 40,000 a piece in October 2016.
Bitcoin and other cryptocurrencies are neither coin nor currency, but products of software and people have assigned value to them. Experts say it is a speculation and pricing game. One can see that the price of Bitcoin in India will be different from the price in US or Japan by a wide margin. The latest surge in the price of Bitcoin is largely driven by Japan and South Korea. It has been deemed a legal means of payment in Japan while the US has recognised it as a commodity. The global circulation of cryptocurrencies is now estimated to be about $90 billion (~Rs 5.7 lakh crore), nearly half which is Bitcoins.
Bitcoin was invented by an unknown Japanese person/persons under the name Satoshi Nakamoto and was released as open-source software in 2009. It essentially operates on a peer-to-peer basis. It is both a digital asset and payment system, the users of which can transact directly among themselves without a banking intermediary or regulatory watch. Bitcoin is generated through a software, which ‘mines’ a certain value of this digital currency, transfers it directly among users and maintains records on a distributed ledger powered by blockchain technology.
Experts have warned that most users buying and selling Bitcoin for speculative activities rather than to buy things or transfer money to other people. It also has been in the news after authors of ransomware virus demanded Bitcoin payments from victims. Bitcoin beneficiaries are anonymous, something that regulators will howl at, if not now, in the future. Recently, a Russian man was arrested by Greek authorities for allegedly running a Bitcoin exchange that’s accused of being a money laundering operation.
Bitcoin users in India are relatively small. Still, the number of users has increased ten-fold from about 1 lakh to 10 lakh in the past one year. Users in India can use Bitcoins to transfer funds overseas, buy pizza and movie tickets or shop on Amazon, Flipkart, Freecharge, Bookmyshow and Makemytrip.
This has alarmed the policy makers, who fear a bubble burst similar to dot-com in 2000 and housing in 2008, bringing tears to many. Currently, there is no law to bar use of virtual currencies in India. The Reserve Bank of India has from time to time issued warnings to people to stay away from digital currencies to protect themselves from financial fraud.
A panel set up by the finance ministry is understood to have recommended to the government to immediately stop use of cryptocurrencies by the public. It could also take measures to stop advertisements by cryptocurrency start-ups. Ultimately, it may bring in a new legislation similar to the one related to prevention of gambling. ends