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.