The Committee of Finance Ministry has called for public opinion on whether Bitcoins (and other Virtual Currencies) should be banned or regulated or observed and thereafter the committee may come a decision at its own convenience.
If we observe the pages of Mygov.in where the discussion has been opened, there is a concerted effort by the Bitcoin supporters to post comments that Bitcoin should be legalized. Of course, if any person has already got a stake either because he has bought a Bitcoin already or would like to buy it and convert some of his black money into anonymous Bitcoins, he has to support Bitcoin legalization.
In the meantime the Bitcoin price is skyrocketing in the last few days which could indicate one of the two reasons namely,
- There is more and more ransomware attacks demanding bitcoins and the victims are scrambling to buy bitcoins and the increased demand is pushing the price up.
- The Bitcoin community has already convinced the committee that the Government may continue to “Observe” which is an euphemism that we will turn a blind eye to the blatant violation of law in India regarding investment.
The Bitcoin exchanges which are functioning in India are promoting the buying of Bitcoins. Some of them are trying to collect PAN card photocopies and calling it as “KYC. Some are allowing trading only through Bank accounts and some through credit card borrowings. However many are encouraging trading of Bitcoins in cash, and even by converting legacy currency to Bitcoins and vice versa through Lindens. (virtual currency of secondlife.com).
Though legally we say that Bitcoin is an electronic document, a commodity and not a “Currency” and hence it is not illegal to mine, etc. it is being perceived like a “Foreign Exchange” and an “Investment”.
In India, such investments should come under the watch of either RBI or SEBI. It is unfortunate that both are dilly dallying on how to tackle Bitcoin regulation. While RBI has been “Observing” for the last 3 years SEBI appears completely at a loss on deciding how to respond. In fact it is easy to consider Bitcoin trading as similar to commodity trading and determine that it should automatically come under SEBI regulations. This is obvious and does not need the Government committee to decide. As long as the price is spiralling up, it looks like a great investment but if Bitcoin price heads down, then there will be lot of investors who will burn their hands. Then the Ponzi nature of the scheme would get displayed.
Will SEBI take responsibility for dereliction of duty if the speculative investment of Bitcoins continue?
While RBI should be concerned with the Foreign Exchange use in buying and selling of Bitcoins through the exchanges, and to regulate the Bitcoin wallets, SEBI should consider it as its birth right to regulate trading in Bitcoins and there is no need to wait for any Government committee to make up its mind.
Additionally, if one goes through the schemes of investment suggested by some Bitcoin exchanges, it is like a lesson in money laundering. How can RBI, the Finance Ministry and SEBI keep quiet is a mystery.
I have today brought the need for regulation of Bitcoin trading to SEBI and the Finance Ministry and wait for their response.
I have also tried to draw the attention of the PMO and FM so that nothing should be done behind their backs to legitimize the “Currency of the Criminals” which Bitcoin has unfortunately become.
I have many friends in the technology domain who are staunch supporters of Bitcoins and also hold stock of Bitcoins. By no stretch of imagination they are into money laundering but have invested in Bitcoins because it is a technological fascination and ofcourse profitable as investment. It is to ensure that such people donot lose their genuine hard earned money that I have proposed that Government while banning Bitcoin should give a window for conversion of genuine investments out of tax paid income back to legacy currency under an amnesty scheme for a limited period.
Some of them are of the view that there is no way Bitcoin can be banned. I agree that even if Bitcoin is legally banned and the Government criminalizes holdings after the amnesty scheme expires, there will be many who will continue to hold it just like we still have stocks of demonetized currency with some.
This does not mean that we should stop from banning Bitcoin use, exchange, and stocking by any Indian national or in India.
ICICI Bank and HDFC Bank which are bankers to some of the Bitcoin exchanges need to rethink if they have to support this illegal system.
I also request the legal firm Nishit Desai and the NGO , The Center of Internet Society not to allow their names being used prominently in the promotion of Bitcoin trading knowing fully well how the legal status of Bitcons and the way it is perceived and promoted are completely different.
If Bitcoin community was itself not supportive of the criminal use of Bitcoins they would have by this time identified and published the identity of ransomware introducers whose bitcoin wallets IDs were available for analysis.
The community is guilty of looking the other way because there is financial benefit to them and not care about the victims of ransomware. This is corruption of a kind.
Today, Bitcoin no longer remains just a technical innovation of the fascinating Block chain technology. It is also no longer an economic issue of currency in circulation outside the central bank’s control.
It is a national security issue where
-Cyber Financial terrorism called ransom ware needs to be choked to death and
-the terrorists and naxalites should not be allowed to use Bitcoins for funding their operations and
-Blackmoney holders should not be allowed to convert their black money into Bitcoins.
I hope regulators like SEBI and RBI will act atleast now before things go out of hand.