With the Bitcoin currency value touching US$1200 and dropping to $800 before settling at $1005 within three days, the Bitcoin has continued to capture the global attention of different kinds of people.
Regulators in particular are getting nervous about how to respond to this enigmatic beast called “Bitcoin” which appears to be devouring the Cyber World. The dilemma before the regulators is whether to allow the Bitcoin usage and/or mining and/or trading to continue within their jurisdiction and if so would it adversely affect the economy.
China appears to have embraced the Bit Coin system with both hands while Thailand became the first country to ban it. Other countries including Britain seem to be trying to find a suitable slot for the Bit coin as a currency (BTC) to work within the economy.
According to telegraph.co.uk, Thailand has become the first country to ban Bitcoins. By this decision it has become illegal in Thailand to buy or sell BTC or use it any trade or send BTC to any person outside Thailand etc.
The Thailand response is a typical response of a regulator who finds it easy to ban it rather than find a way to let it co-exist.
On the other hand, China appears to be moving towards the complete acceptance of the system and a possible attempt to achieve global leadership. Though an official decision has not yet been taken, there are indications that Bitcoins are being encouraged in China.
As this article “China rides rollercoaster love affair with Bitcoin” indicates China already has become the home to the biggest bitcoin exchange. BTCChina with about $60 million in daily transactions has over taken MtGox, Japan the hitherto undisputed leader. BTCChina now transacts about 83000 BTCs per day, a clear 5% higher than MtGox. (Refer chart below). Recent 30 day volume at BTCChina was nearly 50% more than MtGox Japan.
The INR transactions at Rs 77206.63 amounted to about Rs 37 lakhs in 30 days as against US$1.8 million in BTCChina. (There is still no official exchange in India and discussions seem to be on in this possibility by interested persons)
The response of Britain has been different. according to reports Royal Mint may produce physical Gold Coins and offer it as BTC physical version. At present this is dubbed as a commemorative coin for collectors but it appears more a “testing of the waters” experiment to see how the idea is likely to play out.
Going forward, if one observes the download statistics from Sourceforge on Bitcoin mining software, it appears that Chinese are downloading miner software at twice the rate of US. As against 83000 downloads in the last week from China, downloads from US has been around 36000/-. India is way down the list at around 2800.
These statistics indicate that China has taken it upon itself on a war footing that in the remaining 9 million BTCs remaining to be mined, China will have the maximum share. There are also indications that sophisticated mining facilities have been set up in Hong Kong. This would not be possible except with state support and investment.
India needs to consider that the threat of Bitcoin as a currency to the Indian economy is minimal because it is not big enough at this point of time. However the threat arising out of Chinese monopoly on the BTC as a currency of the cyber space is of greater concern. India suffered in the past during the distribution of IPV4 addresses and failed to get its share of the global asset. Now if India does not respond promptly and with aggression, we will again lose the share of the emerging Crypto currency market which includes Bitcoin as well as others.
At present only 9 million out of 21 million available BTCs are left to be mined. This is only 45% of the global share. Even if we join the race from now onwards, we will still end up at the lower end of BTC wealth. Still we need to make a run for it as an economy and also device other strategies to protect our interests in the growing crypto currency market of the world.
This requires immediate positive action from RBI with the support of the Government. I envisage that the policy on Bitcoins in particular and other cryptocoins in general could become an election issue in 2014. Will the net savvy Narendra Modi be favourable to BTC or will Mr P.Chidambaram jump in first to beat Modi to this credit, will be an interesting development to watch.