Header image alt text

Naavi.org

Building a Responsible Cyber Society…Since 1998

Thanks to the recent WannaCry ransomware that attracted wide attention, security professionals seem to have moved fast and identified what is claimed as a “Vaccine” for the Petya (a new version which some have called NotPetya) ransomware which is on the prowl. So far a couple of Indian companies seem to have been affected. May be we are not aware of more.

This ransomware appears with the following note on the affected desktops.

Just before the encryption, the following screen shot will appear.

When this alert appears, if the machine is powered off, the encryption would be stopped and the files may be preserved.

It can then be recovered by connecting it as an external hard disk to a secure system under a forensic supervision without booting from the disk. It should however be taken care that there is no reverse infection from the affected disk to the healthy system.

It may be better if the observation computer is first vaccinated as suggested subsequently here and even prudent if it is a clean machine with no other data to avoid any adverse effect of reverse infection if it occurs.

Also since the ransomware first delets the files before encryption and the proccess has been stopped in between, if the files have already been deleted, one may need to use a deleted data recovery software before the sectors are over written.

It appears that  this cyberattack appears to be an “updated variant” of the Petya malware virus. It uses the SMB (Server Message Block) vulnerability that WannaCry did, however in the case of Petya it encrypts, among other files,the master boot file. These messages recommend conduct a system reboot, after which the system is inaccessible. This basically means the operating system won’t be able to locate files.

Also Bleeping computer.com has suggested a simple vaccine which is available here: 

The suggested kill switch is creating a file titled “perfc” as a read only file in the Windows folder for which step by step guideline is provided in the article available here: 

I hope with the vaccine, the damage will be contained.

A reminder however is due that the attack again under scores the need for proper back ups in an off Network system and employees being vigilant in not downloading the ransomware through attachments in e-mails etc.

One of the suggestions made by experts is to block an e-mail and several IP addresses and domains as listed below.

Actions to be taken:

1. Block source E-mail address
wowsmith123456@posteo.net

2. Block domains:
http://mischapuk6hyrn72.onion/
http://petya3jxfp2f7g3i.onion/
http://petya3sen7dyko2n.onion/
http://mischa5xyix2mrhd.onion/MZ2MMJ
http://mischapuk6hyrn72.onion/MZ2MMJ
http://petya3jxfp2f7g3i.onion/MZ2MMJ
http://petya3sen7dyko2n.onion/MZ2MMJ
http://benkow.cc/71b6a493388e7d0b40c83ce903bc6b04.bin
COFFEINOFFICE.XYZ
http://french-cooking.com/

3. Block IPs:
95.141.115.108
185.165.29.78
84.200.16.242
111.90.139.247

I urge ISPs and MSPs to accomplish this at their end so that individuals are not required to do it at their end.

Naavi

Reference:

Cert-In recommendation is available here

Bitdefender  vaccine is available here;

Also read:

Petya Ransomware Outbreak Originated in Ukraine via Tainted Accounting Software

Petya cyber attack: Everything to know about the global ransomware outbreak

WORLD CYBER ATTACK: How to unlock computers hacked by Petya virus

Kasparesky: Petya ransomware eats your hard drives


Update:

Posteo.net has blocked the email accounts used in the Petya attack.

……..The action initiated by Posteo.net needs to be appreciated.

Naavi

The task force on the Bitcoin formed by the Central Government is presently battling the lobbying pressure from ZebPay and other stake holders who want Bitcoin to be legalized in India and the contrarian voices of people like the undersigned and trying to arrive at a decision at the earliest.

The main public input they are considering is the MyGov.in discussion board. On the discussion board, a number of pro-Bitcoin messages were planted by vested interests. There was even a message from an insider in the name of MCX supporting the Bitcoin legalization which was quickly removed on objection.

Additionally the committee/taskforce appears to have met ZebPay several times in closed door meetings and held consultations.

It is anybody’s guess why the committee should have closed door meetings with a stake holder and not a public open meeting. Add to this, the attempt of MCX, a regulatory agency itself trying to bat for Bitcoins in the discussion board and its Directors not taking any noticeable action to punish the insider influencers.

Any intelligent observer can take a guess in these circumstances that pressure is being brought on the Task Force for a favourable decision that leads to the Bitcoin Exchanges being permitted to conduct their business freely perhaps under the guise that they take the PAN card number of the traders and claiming that they have “De-Anonymized Bitcoin Transactions”.

The frequent utterings of WebPay representatives in the media to the effect that “Bitcoin is in the process of legalization” indicates a level of confidence that is not giving a feeling of comfort to neutral observers. Additionally the fact that the names of the individual members of the initial commitee and the Task force and their failure to disclose and declare that they donot have any holdings of Bitcoins add to this discomfort.

There is a genuine fear that the decision of the Task force has already been fixed and it could be announced as soon as the time is ripe may be when the entire media is busy with the discussions on Jaitely’s GST effort and Modi’s US visit.

I hope that the task force members are not gullible enough to think that even if they are prepared to believe that Bitcoin legalization is beneficial to the country and therefore it should be promoted, the larger audience are gullible to believe similarly. They should therefore expect that any decision to push Bitcoin legalization in India would be challenged in the Court both for the imprudence as well as possible bias besides being raised within the BJP party fora.

Mr Modi has been proudly claiming that his Government has not seen any scam in the last three years and would like to keep up this record.

However, in the event of Bitcoin is legalized, there could be a perception that this decision hides a scam as big as the Coal scam of the UPA regime.

I expect that the CAG will take note of the possibility of a biased influence on the decision of the task force and keep observing how the decision on Bitcoins unfolds. The discussions which the committee has held with ZebPay and others should be matters subject to RTI query and if these records are destroyed and refused to be divulged in an RTI, it would confirm that “Dal Me Kuch Kala tha..”

The reason why I consider “Legalization of Bitcoins would lead to one of the biggest scams in the Modi Government” is as follows.

On November 8, 2016, Mr Modi demonetized the Rs 500 and Rs 1000 currency notes in a bid to curb black money in India. Subsequently the Finance Minister Mr Arun Jaitely successfully negotiated with the authorities in Switzerland to provide information on the bank accounts of Indians held in Swiss Banks at least in future. The message from the Government was very clear that the Modi Government was keen on curbing black money which is also an effort to reduce corruption. The other attempts such as linking of Aadhar to PAN card and Benami Property identification etc are also measures that the Government is projecting as a comprehensive strategy towards curbing black money.

However, if the Bitcoin task force succumbs to the pressures from vested interests and legalizes Bitcoin or otherwise gives an impression that the Government is not keen to intervene and people can do what they want with Bitcoins…accept them as legal tender for goods and services if they so desire….then in one stroke a huge stock of Bitcoins held not only by Indian Citizens but people all over the World including many of them who are criminals, some of them who are enemy countries will become part of the money circulation in India. They could dump the Bitcoins to Indians and create chaos in the market.

Currently, it is estimated that the total currency in circulation in India around November 2016 when the demonetization exercise started was around Rs 14.26 lakh crores. (There are other estimates which put the figures higher). Out of this stock of currency, at least notes equivalent to Rs 6.32 lakh crores represent the demonetized notes sought  to be removed from the system.

All the measures that the Government is now undertaking such as the use of UPI, BHIM or AEPS etc where we talk of “Digital Payments and Digital Currencies” donot add to the money circulation. They are simply alternate channels of using the money available in the system and could reduce the need for holding currency.

However, the current discussion of “Virtual Currency” refers to Bitcoin and other similar Crypto Currencies which are all fungible and indistinguishable. Its impact would be to create a new stock of liquid cash that can be used to buy goods and services with the receiver not obliged to bring it into the books of account as “Measurable Revenue”. Also this may be held in Bitcoin wallets with players abroad and one fine day declared as “Lost Due to a Cyber Attack”. While new buyers withdraw money from the Banking system and buy Bitcoins, the Bitcoin wealth itself may not return to the Banking system. It will remain in invisible and anonymous wallets and transferred to other similar wallets.

Now if the Bitcoin is legalized, not only the current stock of Bitcoins but also the other Crypto Currencies which are convertible into Bitcoins (including any National Crypto Currency which provides for seem less conversion with Bitcoins as well as pseudo currencies like Lindens) will become part of the money supply in India.

Currently it is estimated that the market capitalizaion of Bitcoins is about Rs 2,7 lakh crores and market capitalization of all Crypto currencies including Bitcoins is around Rs 7 lakh crores. This is about 50% of the current money supply.

This means that the money supply in India would double overnight with any move to legalize Bitcoins.

Judging from the records of earlier years the money supply in India has an annual accretion of around 8-10% while the inflation levels have been around 5-7%. Currently the Government has brought inflation down and is targeting an inflation level of around 2% by the next year.

If the money supply jumps by 50% overnight, the inflation level will also jump. Historical data suggests that inflation could jump to astronomical figures of upto 40% P.a. Assuming that the Crypto Currencies held by foreigners and Criminals may not come into circulation, the real increase in the money supply in actual circulation and the inflation effect may not be that alarming. But there is no doubt that there will be a huge inflationary pressure which would make the Government miss the inflationary targets in the next few budgets at least until the next Loksabha elections in 2019.

Hence all dreams of BJP going to the next election with an economy that shows “Good Governance” and “Acche Din” will vaporize.

Is Mr Jaitely ready for this risk? Does Mr Amit Shah and Mr Modi aware of this risk?… I have my doubts.

It is therefore necessary for Mr Jaitely who is busy with GST and Mr Modi with the US tour to immediately spare some time towards what the Finance Ministry’s task force on Bitcoin regulation is likely to do. If they are negligent, the future of India could be put in jeopardy.

I sincerely hope that the Task force has realized the enormity of the effect of the decision which the Bitcoin supporters are trying to lure the committee into taking.

Whether the CAG recognizes the latent scam or not, Whether the media is interested in focusing on this impending decision of huge implications on the economy, we shall keep our vigil. We shall do our best to ensure that no decision is taken to legalize Bitcoins which we firmly believe is the currency of Criminals, Terrorists and Black Money holders. We request the public to render their vocal support in this regard and ensure that the message reaches the right quarters.

Naavi

 

For quite some time the RBI’s Banking Ombudsman Scheme has been defunct since the scope of the scheme has been interpreted by the Ombudsman as very limited. In most cases, Ombudsman have the habit of not only rejecting the complaints of the customers stating that “It requires elaborate examination of evidence”, they also bar an appeal against their decision.  Many Ombudsmen are also biased in their approach and favour the Banks with decisions that completely frustrate the very existence of the scheme. Naavi.org has discussed the issues earlier and pointed out the problems. At  present most of the customers have treated this scheme as of only a marginal use to the customers.

It now appears that some effort is being made to re-activate the scheme by expanding the scheme.

As per the amendments notified on June 16, 2017,   the following changes have been notified:

  1. The Banking Ombudsman shall receive and consider complaints relating to the deficiencies in banking or other services filed on the grounds mentioned in clause 8 irrespective of the pecuniary value of the deficiency in service complained and facilitate their satisfaction or settlement by agreement or through conciliation and mediation between the bank concerned and the aggrieved parties or by passing an Award as per the provisions of the Scheme.

Comment: It may be noted that the undersigned had raised objection that Bank Ombudsman donot even care to organize a meeting between the customer and the Bank and simply dispose of the complaint based on a reply from the Bank which may be grossly insufficient from the point of view of the customer. Now it is clarified that the role of the Ombudsman is that of a “Facilitator” whose goal is to bring about a reconciliation and if necessary he should be a “Mediator” in achieving the settlement.

2.  The type of complaints handled will include the following:

A) Non-adherence to the instructions of Reserve Bank on ATM / Debit Card and Prepaid Card operations in India by the bank or its subsidiaries on any of the following:

  1. Account debited but cash not dispensed by ATMs
  2. Account debited more than once for one withdrawal in ATMs or for POS transaction
  3. Less/Excess amount of cash dispensed by ATMs
  4. Debit in account without use of the card or details of the card
  5. Use of stolen/cloned cards
  6. Others

B) Non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on credit card operations on any of the following:

  1. Unsolicited calls for Add-on Cards, insurance for cards etc.
  2. Charging of Annual Fees on Cards issued free for life
  3. Wrong Billing/Wrong Debits
  4. Threatening calls/ inappropriate approach of recovery by recovery agents including non-observance of Reserve Bank guidelines on engagement of recovery agents
  5. Wrong reporting of credit information to Credit Information Bureau
  6. Delay or failure to review and correct the credit status on account of wrongly reported credit information to Credit Information Bureau
  7. Others

C. Non-adherence to the instructions of Reserve Bank with regard to Mobile Banking / Electronic Banking service in India by the bank on any of the following:

  1. delay or failure to effect online payment / Fund Transfer,
  2. unauthorized electronic payment / Fund Transfer,

Additionally, Non-adherence to Reserve Bank guidelines on para-banking activities like sale of insurance / mutual fund /other third party investment products by banks with regard to following:

  1. Improper, unsuitable sale of third party financial products
  2. non-transparency / lack of adequate transparency in sale
  3. non-disclosure of grievance redressal mechanism available
  4. delay or refusal to facilitate after sales service by banks

will also be grounds that the Ombudsman will consider.

It is further reiterated that

“For the purpose of promoting a settlement of the complaint, the Banking Ombudsman shall not be bound by any rules of evidence and may follow such procedure as he may consider just and proper, which shall, however, at the least, require the Banking Ombudsman to provide an opportunity to the complainant to furnish his/her submissions in writing along with documentary evidence within a time limit on the written submissions made by the bank.

Provided, where the Banking Ombudsman is of the opinion that the documentary evidence furnished and written submissions by both the parties are not conclusive enough to arrive at a decision, he may call for a meeting of bank or the concerned subsidiary and the complainant together to promote an amicable resolution.

Provided further that where such meeting is held and it results in a mutually acceptable resolution of the grievance, the proceedings of the meeting shall be documented and signed by the parties specifically stating that they are agreeable to the resolution and thereafter the Banking Ombudsman shall pass an order recording the fact of settlement annexing thereto the terms of the settlement.”

As regards the quantum of compensation, the following clarification has been provided:

“Notwithstanding anything contained in Sub-Clause (4), the Banking Ombudsman shall not have the power to pass an Award directing payment of an amount towards compensation which is more than the actual loss suffered by the complainant as a direct consequence of the act of omission or commission of the bank, or two million rupees whichever is lower. The compensation that can be awarded by the Banking Ombudsman shall be exclusive of the amount involved in the dispute.

The Banking Ombudsman may also award compensation in addition to the above but not exceeding Rs. 0.1 million to the complainant, taking into account the loss of the complainant’s time, expenses incurred by the complainant, harassment and mental agony suffered by the complainant.”

The The amended Scheme  is available on the Reserve Bank’s website at :

 https://www.rbi.org.in/commonman/English/Scripts/AgainstBank.aspx

The amendments are welcome and hopefully it will be implemented by the Ombudsmen in the spirit of assisting the aggrieved customer rather than simply protecting the interests of the Bank involved.

Naavi

It is good to note that the World view is slowly but surely tilting towards the adoption of Crypto Currencies which are managed by the regulators of the Fiat countries instead of the privately managed “Decentralized” and “Unregulated” Crypto Currencies like the Bitcoin or other Alt Coins which have been adopted by Criminals as the currency of the underworld.

First it was the Russia which announced that it would get its own National Currency. Close on its heels we now have an announcement that China will also adopt its own National Crypto Currency. At this point of time the full details of how these currencies are likely to operate is not clear. But the concept is similar to what we have been advocating for the last several years that we can use the Block Chain technology for creating a Crypto Currency which will be managed and controlled by the Central Bank of a country. We called it as a BitRupee in the Indian context.

The RBI is already aware that an Indian Non Resident has already proposed an algorithm for “GreenCoin” where a provision is built in for a de-anonymized version of the Crypto Currency which can be used by RBI to test run the feasibility of a “Regulated Crypto Currency” if it is open to the idea. So far RBI has remained silent on the proposal and the Finance Ministry’s sub committee on BitCoin regulation which has had multiple discussions with ZebPay does not seem to have had any discussion with the Green Coin creator nor with others who think Bitcoin has crossed the line of ever being accepted as a Currency of the civilized world. However, the inherent character of RBI to be cautions in such matters may ensure that the Committee or the Task force of the Committee would not take a decision to write a death note for the Regulated Currency system by adopting either the Bitcoin itself or any of its alternatives like the Ethereum etc.

The BitRupee which we are suggesting is a concept that may have the following charecteristics built into the algorithm.

  1. Every Newly mined unit of BitRupee will carry an identity tag like the printed serial number of the Currency. Whenever a Bit Rupee is sub divided, the identity will be carried through to every sub unit.
  2. The BitRupee identity would be generated during the mining process or its sub division process only with a key from the RBI so that every such creation and sub division will be with the approval of the RBI.
  3. The Control of the key that validates the mining of a new BitRupee or its sub division would be a separate matter of discussion. Suffice it to say that this will determine the security of the system and has to be on a “Distributed Control of several Persons” on the lines of how the domain name system is regulated through the root server management.(Refer here for more information on how the DNS system is controlled). It should not be under the control of a single person even if that single person is the “Governor of RBI”.
  4. Every subsequent sale or purchase of a BitRupee or its subdivided unit which we may call BitPaisa or by Bit Anna, Bit Kasu etc will be routed through accredited exchanges like the Authorized Dealers of today and a transaction code will be tagged with each transaction.
  5. The transaction code will track the origin and destination BitRupee wallets which will be maintained by accredited Wallet Service providers who are licensed under the Payment and Settlement Act (Being modified as suggested by the Watal Committee).
  6. The Exchanges may be monitored by a joint regulation of RBI and SEBI like the Foreign Exchange transactions now carried through in the MCX or by a separate Crypto Currency exchange to be created by statute. It may be called the Crypto Currency Regulatory Authority of India.
  7. In every successful mining transaction, a certain number of BitRupees would be generated and a portion of it will be credited to a fund of the Government as a “Reserve”. The exact percentage of how much should be credited to the fund may be regulated in the Crypto Currency monetary policy like we manage the SLR/CRR today. It could be as low as 30% or as high as 70%. It could start with some percentage and modified from time to time.
  8. An important aspect of the suggested regulation would be that this system would be insulated against the system of Private Crypto Currencies and no buying or selling against such currencies would be allowed by the accredited exchanges. The “National Currencies” of other countries as and when they emerge may be brought into a pool of “Permitted Exchangeable Crypto Currencies” and this system would be managed with a Crypto Currency Management Act or CCMA like the FEMA. It should therefore not be possible to convert any of the current holdings of Bitcoins or other AltCoins into BitRupee through these accredited exchanges. All other transactions of AltCoins would be specifically considered as “Unauthorized” and treated as a violation of the CCMA

The above system runs on the established Block Chain technology like the one used in Bitcoins but controlled by a special algorithm which manages the requirements mentioned above. We should be able to build in the limitation on the total currency, changing difficulty levels etc so that technology people can have an experience similar to what they now appreciate in Bitcoin and love it for. There will be scope for BitRupee exchanges and  Wallet Services which the current day business entities like ZebPay would use to further their business. Hence there will be no obstruction to the business interests of the early innovators in the BitCoin eco system in India.

Licensing of  Exchanges and Wallet Providers will be regulated under the common principle that “Financial Wealth of the Country cannot be exported out without the regulation and supervision of the Central bank” which means that business entities of foreign origin need to be regulated like the regulation of Foreign Banks.

It needs to be debated on how this type of “Indian National Crypto Currency” would be received in the market and what will be its impact on the economy. It will definitely add to the money circulation and hence RBI needs to monitor the total money circulation which includes the mined BitRupee stock with the floating currency. Gradually RBI may reduce its printing activity so that the floating stock of physical currency may keep shrinking as the BitRupee along with other forms of digital payment systems take root.

Over a period, all sovereign Governments working under the UN will float their own National Currencies and India should insist that only those currencies which donot provide a conversion of private Crypto Currencies to the National Crypto Currency of that country would be accepted for conversion and trading with the Indian BitRupee. Other Crypto currencies should be treated on par with AltCoins even if they are termed as “National Crypto Currency” by that particular country. This may require adoption of other country’s National Crypto Currency into our Crypto Currency Exchange mechanism through individual “Crypto Currency Treaties” to be negotiated and signed with each such country.

This would in due course develop a “Global Crypto Currency Monetary/Regulatory Authority” (Like the IMF) and India should take the lead in setting it up with headquarters in India… probably in the Silicon City of India.

The suggestion given above is for debate and we invite the members of the Task Force of the Bitcoin regulation committee consider this proposal. There could be improvements to the above suggestions and we need to find the technical solutions to structure the algorithm, test it for functional robustness and security before it becomes a reality. But we should start this exercise without further delay.

Naavi

 

In the Kumble Vs Kohli fight, it was Kohli who came out as the immediate victor since BCCI accepted the principle that Coach is dispensable but not the Captain. BCCI upheld the principle that a Coach is only a PR manager and if he is a good friend to swim with and drink with for the players, he should be preferred over a disciplinarian who wants “Performance” over the field and a structured process to reach a good stable performance level for the team.

In the Bitcoin battle, I see a similarity. The technology oriented school of thought is that Bitcoin is an “Innovative Technology” and it needs to be adopted as otherwise the country will be left behind. This is like Kohli’s school of thought that he as the team captain is the king and his word is the law. On the other hand, there is another school of thought that Bitcoin is not good for the economy and its technology needs to be put through a process at the end of which we need a stable contribution to the society. This is like the Kumble’s version that Captain needs to be placed on track with a team and strategy for which the Coach should be accountable.

In the place of BCCI we now have the Task force of the Ministry of Finance and just as Mr Ravi Shastri whose shadow of  influence is perceived in the whole Cricket drama, we have ZebPay’s shadow of influence appearing to use all its PR  skills to drag the Task Force decision in its favour.

In the early stages of this controversy, I suggested that the members of the Committee of the Finance Ministry who were tasked with this Bitcoin regulation should declare that they donot have any stakes either in the form of holdings or otherwise of Bitcoins. Now this needs to be applied to the “anonymous Task Force” which the Finance Ministry has created which has so far had several anonymous discussions with ZebPay. I hope this request would be considered by the Government of India and the members.

Otherwise we need to wait for some “Ramachandra Guha” on a future date to spill the confidential discussions with ZebPay and we need some “Arnab Goswami” to draw the public attention on what transpired in these “Anonymous Discussions” about the “Anonymous Currency” by the “Anonymous Task force”.

However, while Kumble-Kohli drama was a game of Cricket and even if we had to lose one game against Pakistan to prove a point that Captain is bigger than the Coach, the country is not going to dogs. But the game of Bitcoin is different. It cannot be thrown away like a Cricket match.  We need to fight til the end and even beyond even if ZebPay has its way for now.

This is because, the Bitcoin fight is not against the technology of Bitcoin (Block Chain) or the Ethereum technology which is said to be better or even some others like the Ripple. It is the fight against Black Money and instruments that can be used to acquire and use unaccounted wealth.

If ZebPay has its way and gets Bitcoins and all Alt Coins legalized, then all those who are presently holding them anonymously and will acquire in future will have a means of using the Bitcoins in the physical economy and covert our physical goods into Bitcoins which will be held at different Bitcoin wallets anonymously. When a Car is sold against Rupee the dealer’s revenue comes into the Indian Banking system and there will be GST or whatever tax is paid their on. But when a Car is sold for Bitcoins, India is at the mercy of the dealer who may declare and deposit it within the Fiat system or chose to hold it in a Bitcoin wallet abroad which our law enforcement will not be able to touch.

ZebPay will say that they will have KYC and collect the details of the buyer and seller. Even today we expect that our Banks are doing KYC for their accounts. Even Aadhaar is doing its own KYC before issue of the ID. But despite the intentions being good, Banks and even UIDAI often find that their KYC fails. Mobile service providers are no better. If these agencies have not been able to maintain proper KYC , how will ZebPay guarantee that they will provide impeccable KYC for their transactions? Just because they note down the PAN number as declared by the account holder, does it bar the customer from declaring a PAN number stolen from some other source?. During the demonetization drive, a number of “Poor” JanDhan account holders became rich overnight because their physical society masters parked their Black Money into their accounts and converted honest citizens into money mules. Our respectable Bankers did their bit to create false old currency holder’s identities to exchange new currency. Many Cooperative Banks under the control of politicians were excellent in converting old currency to new through their Banker credentials.

Knowing all this if we trust ZebPay and Coindesk or Coinbase to carry out reliable KYC, then we should be first grade fools. I am sure that the Task force does not consist of such gullible persons.

Also, even if the first level of transaction with a Bitcoin exchange does actually conduct proper KYC, there are many methods to anonymize the transactions before and after the exchange transaction so that the traders will be “Bitcoin Mules”. We know that many havala operators finance people to travel to Singapore or Dubai by air just to carry some goods from here to there and bring back some thing else from there to here. We will find versions of these in Bitcoin laundering for which the exchanges will not accept any responsibility.

It is therefore clear that  legalization  of Bitcoins as well as other AltCoins not controlled by the Government will be a boon to all black money holders who are now looking for an alternative to Swiss Banks.

This will defeat Mr Modi’s efforts to curb Black Money and also fake money created by Pakistan and circulated in India.

If any body wants to challenge this hypothesis they are welcome.

I therefore consider that the present Bitcoin battle is a battle between the Black Money owners of India and Mr Modi. ZebPay and others may be willing partners to such efforts just as some Banks tried to help out Politicians and other Black Money owners to convert holdings of old Rs 500 and 1000 notes which were demonetized.

I suppose the battle of ZebPay Vs Modi will be more skewed towards Modi than the Kohli-Kumble battle and the other influencers will not be able to tilt the scale in favour of ZebPay.

While Modi is out in USA in the next week there is every possibility that the task force may try to slip in some notification to appear as if ZebPay will be the winner but if this happens, then sooner or later we will definitely also see a reversal of things since this is a battle that Mr Modi cannot afford to lose.

Whether Mr Arnab Goswami takes up the fight against Bitcoins or not, Naavi.org will continue its fight with the hope that  even if battles are lost, the war would be won. Victory has to be ultimately for those who are trying to eliminate Black Money which is also linked to elimination of corruption in India which itself is the key to the future growth.

Naavi

While the Government of India’s committee on Bitcoin regulation is in the process of evaluating the responses received on the MyGov site on whether Bitcoin is to be Banned or Regulated or Observed?, there have been a spate of articles in the media posted by ZebPay which is one of the prominent stake holders  in the Bitcoin game trying to suggest that Government will regularize Bitcoin in India.

According to coin telegraph.com, (26th may 2017)

Zebpay, one of India’s Bitcoin exchanges, has over 500,000 downloads of its mobile app and is adding about 2,500 new users every day.”

Business today carried an article on 6th June 2017 on “How to buy and Sell Bitcoins”. The magazine quoted

“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……Unocoin, another India-based exchange, lets you trade Bitcoins. They can help you buy, sell, store, use and accept bitcoin.”

The magazine proudly quoted some of the promoters of these Bitcoin exchanges that after the demonetization, the transactions in Bitcoins have increased manifold.

Money Control on June 17, 2017 carried an article by the promoter of ZebPay stating that “Financial Inclusion can be a reality with virtual currency”. The article went on to say

“With India aspiring to be a digital and financial hub in the lines of countries like London, Hong Kong and Singapore, encouraging virtual currency operations and usage will enhance its chances of increasing its global footprint as a financial hub….. it makes immense sense to explore the potential of virtual currency to serve the unbanked with modern financial services. Opening cryptocurrency accounts is far easier than opening bank accounts.”

And today there was an interesting article headlined “Suddenly, Bitcoin to Be Officially Legal in India” in cointelegraph.com.

This article went on to say

“The efforts of the Bitcoin exchanges in India to self-regulate the market allowed the Indian government to reconsider the Bitcoin and digital currency sectors, regardless of the criticisms by several politicians that significantly lack knowledge in cryptocurrency.”

The article was particularly critical of Mr Kirit Somaiah, the BJP MP, stating,

“..Kirit Somaiya, a member of parliament of the ruling BJP in India, was harshly criticized for his description of Bitcoin as a Ponzi scheme….. . In a letter to the Finance Ministry and the Reserve Bank of India, Somaiya explained that Bitcoin is a pyramid Ponzi-type scheme. However, Somaiya was criticized for his inability to understand the structural and fundamental difference between a Ponzi scheme and Bitcoin…..(Ed: Not clear who was criticizing )

…..In spite of the negative attitude of certain politicians, the Indian government has come to a decision to regulate the market and provide an even playing field for Bitcoin exchanges that have allocated a significant amount of resources to standardize the market and industry

….On June 20, CNBC India announced that the Indian government committee has ruled in favor of regulating Bitcoin and is currently establishing a task force to create various regulatory frameworks with the aim of fully legalizing Bitcoin in the short-term.

….Prior to the announcement of the Indian government, Chris Burniske, ARK Invest’s crypto lead, noted that the trading volumes in India have been on the rise. Burniske previously revealed that the Indian Bitcoin exchange market is responsible for processing around 11 percent of Bitcoin-to-USD trades…..The legalization of Bitcoin in India is expected to further increase trading volumes and Bitcoin activities in India by significant margins.”

From the above news reports it is clear that there is a concerted effort to plant stories in the media to influence the thinking of the Committee and the task force it may set up as a part of a routine process before any further action is taken.

Will the Committee and the Taskforce fall for it?. Probably not… because these reports corroborate our previously expressed view that Bitcoin and other AltCoins will be used by the Black money owner who were hurt by the demonetization efforts of Mr Modi to continue to build a parallel economy in India outside the control of the Government.

If some body says Bitcoin is “Financial Inclusion” we wonder whether that gentleman think all others are fools to believe this nonsense?

However, we cannot rule out the possibility that these people who are planting stories in the media will not try to influence any member of the committee or the member of the taskforce or that he might not have already done it. We need to be therefore vigilant.

I had already pointed out how MCX had posted a message in the MyGov website suggesting legalizing of Bitcoins. When it was questioned, MyGov.in quietly withdrew the message without even an apology. MCX has also not taken any action so far on whoever was responsible for using its name to post a message which was an “Insider’s attempt to influence the committee”.

If and when the committee takes a decision which would mean bordering on legalization of Bitcoins, there could be a demand for a CBI enquiry on whether the Committee or the Taskforce took the decision fairly or under any influence of the so called “Stake Holders”.

We know that the committee has met the Bitcoin Exchange representatives and taken their views. Did they get influenced?… time will tell.

It is not clear if the Committee have taken the views of public who are tax payers and may revolt if the Government is seen to do anything that would bring back corruption through the backdoor in the name of Bitcoins.

Sooner or later we will have at least one incident where the terrorists of Kashmir will be caught using Bitcoins. Then all those who supported Bitcoin legalization will also be answerable to all the citizens of India who are up in arms against terrorists.

I therefore think that the Committee would not take a decision as is being suggested by the Bitcoin exchange promoters in the above articles. On the other hand, this could be part of  what is called “Pump and Dump Fraud” which is common in stock market circles where the price is pumped up through false news and current holders dump it when the price is high. Now that the Bitcoin prices have reached US$3000, there may be an attempt to dump the holdings by the current holders to the new “Mules” who would be interested in taking a shot at Bitcoin as an investment.

I congratulate Mr Kirit Somaiah for his views and request him to personally pursue this with the Finance Ministry so that no decision is taken to legalize Bitcoins.

I have already placed some thoughts on how Bitcoins can be banned along with other Alt Coins first by nullifying its legal recognition as a “Commodity” under ITA 2000/8 and then declaring any transaction where Bitcoin is treated as a “Purported Currency or Commodity” as illegal.

Then we need to close all Bitcoin Exchanges even if they can assure KYC for their customers.

Just as we cannot allow packets of heroin to be used as a currency and traded in the exchanges just because the exchange promises KYC, we cannot allow Bitcoin or Alt Coins to be traded or accepted by merchants as replacement of fiat currency.

If the task force wants any assistance on regulation, there will be plenty of assistance. If there is any attempt to push through a legislation legalizing Bitcoins while Mr Modi is busy with his tour of USA, the matter would be taken up with Mr Modi and Mr Jaitely who need to answer how they would control Black Money and Terror funding with Bitcoins and AltCoins around.

We hope that Government will have the courage to stand up to the pressures of the vested interests who want Bitcoin to be legalized.

I anticipate that there will be an attempt to discuss Bitcoin regulation during the DSCI conference in Bangalore on 23rd of June and there could be an attempt to influence DSCI to support the legalization of Bitcoins under some pretext.

The developments will be closely watched to see how the PR pressure of Bitcoin exchanges would play out on different Government bodies.

Naavi

 

Close It