Naavi.org

This site has time and again called upon Mr Modi to stand upto his commitment for eliminating Black money by extending the action to the Digital Space by banning the Crypto currencies.  We had urged Mr Modi to take up this “Ban Crypto Currency” campaign to the world scenario and take leadership in fighting against the Digital Black Money and currency of cyber criminals which the Cryptocurrencies like Bitcoin are. It is unfortunate that Mr Modi did not take the cue and procrastinated.

Now Mr Donald Trump appears to have taken up the lead on the Global scenario to express his opposition to Crypto Currencies. Mr Modi has therefore lost the opportunity to be the global leader in this fight against Crypto currency which is also a fight against terrorism, drug trade, illegal arms trade as well as Cyber Crimes.

I hope that Mr Modi will atleast be an early supporter of Mr Trump and take the second spot amongst global leaders to start the fight against Crypto currencies.

If these global leaders donot understand the damage that Crypto currencies can create to the global economy then they will be responsible for the growth of a “Economic monster” as big as the ISIS. The US Fed Chief Mr Powell has also endorsed a similar view asking FaceBook to stop the project.

The reason why Mr Trump has called out Bitcoins and Crypto Currencies is the threat that FaceBook has posed with its project “Libra”.

So far, some people neglected to raise their voice against Bitcoins because they felt that the threat is too small to be worried. Also the Bitcoin and the 1600 other Crypto Currencies were not capable of creating their own eco system for using the currencies and had to depend on the trading and exchange infrastructure of the physical world.

But FaceBook poses a threat of a different dimension. First of all it has the membership which is equivalent to the largest nation states in the world. So reaching out to all these members with information on Libra is too easy. Additionally Face Book (along with WhatsApp) has a usage eco-system consisting of not only its own Game platforms but also access to advertising budgets and through them  the trading platforms of other online e commerce entities. Hence the users of Libra may have a huge usage basis within the Facebook domain itself.

As a result, if Face Book decides to make an issue of Libra as an ICO, there will be enough takers to enable Facebook to simply raise cash from no where. Once established, Face Book will be bigger than the Central banks of many countries issuing Libra whenever it wants and converting it to legacy currency in the back ground.

The impact of such a development is too grave to ignore even for the US economy.

At present FaceBook says that it will not launch Libra in India. This only means that the ICO may not be available through Indian Banks. But those who have money in International Banks will be able to buy and trade in Libra. Additionally Libra is likely to be freely convertible to other Crypto Currencies and hence holders of other crypto currencies will be able to convert them into Libra and vice versa. Since there are a few stupid countries which have provided conversion of Bitcoins into legit currencies, the entire global system of currencies will be corrupted with the Crypto currencies.

For example, the Cyber Criminal who extorts Bitcoins through a ransomware may be able to convert them into Swiss Francs and Japanese yens which may then be converted into INR through RBI making it possible to convert  Bitcoin to INR in a two step process. This may increase the cost of conversion but may be still cheaper and convenient than other havala operations.

Though Mr Modi has lost the initiative, it may still be possible for him to get back into the ring and share the leadership with Mr Trump in eliminating the menace called “Crypto Currencies”.

I wish Mrs Nirmala Sitharaman and Ravi Shankar Prasad guide Mr Modi properly in this regard. The RBI has taken the right first step to ban the exchanges but is hesitant to take the next step because of lack of support from the Finance Ministry. The Supreme Court cannot be relied upon to take the bold step since they can be swayed more easily by the arguments of a Kapil Sibal or Manu Singhvi than what is good for the nation.

Let’s hope the current CJI is different and on July 23 when the Supreme Court takes up the petition of the Bitcoin industry, he and his brother judges show the courage to stand up for the good of the society and the ability to understand the economic and other threats of the Crypto currency.

Naavi

Related Articles:

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Modi in Dharmasthala… Has he got the enlightenment that Bitcoin is the biggest threat to tackle after Demonetization ?

Bitcoin Ban-Unfinished Agenda of Modi 1.0

The Bitcoin Battle…Will it be Modi Vs ZebPay?…like Kumble Vs Kohli?…who will win?

Dear Mr Modi, Can you see how China can manipulate Bitcoin Wealth?..Why is Your Government blind?

How Does Bitcoin break India into bits and pieces and realize the “Bharath ko Tukde, Tukde karega” dream of some..

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Index of articles on Bitcoin-The Currency of the Criminals, By the Criminals, For the Criminals

The recent G 20 meet at Osaka which was attended by Mr Narendra Modi discussed among other things the issue of “Money Laundering” and “Terror Financing”. The role of Crypto Currencies particularly in the light of the entry of FaceBook with its proposed Crypto Currency Libra was obviously one of the matters which was discussed as relevant to the issue of money laundering.

Some of the reports that have emerged about the Osaka meeting suggest as if Mr Modi participated in the discussions and the FATF (Financial Action Task Force) has recommended a “Crypto Standard”. An effort is being made to give an impression that India and the G 20 countries are in the process of supporting Crypto currencies.

This is not the correct inference about what appears to have transpired in the FATF meeting.

According to the report  (Refer zdnet.com) Mr Suresh Prabhu  briefed the media in which he confirmed that a discussion about standards for “Virtual Assets” were discussed. But what was confirmed was an affirmation of the commitment to applying the recently amended FATF standards to virtual assets and related providers for anti-money laundering and countering the financing of terrorism.

The G 20 therefore has recognized the role played by Virtual Assets (which includes the Bitcoin and other Crypto currencies) as an instrument of terror financing and money laundering and is thinking of measures to safeguard the society against the same.

The Crypto industry is trying to mis-inform the public to suggest that the deliberations indicate an endorsement of Crypto currencies in India which is an incorrect and mischievous interpretation.

Mr Nishchal Shetty, CEO of a crypto exchange Wazirx appears to have commented

” Implementing the FATF standards would mean that crypto gets a legal status in India. The biggest advantage is to end customers as the crypto industry can once again offer banking services to the fiat on ramps”

The recommendation that has been included in the FATF document is that

” Cryptocurrency organizations should be obliged to obtain, hold and when necessary, transmit information concerning account holders especially when transactions take place which are deemed suspicious”

This essentially means that FATF is recommending that Crypto Exchanges should be able to break the anonymity of every transaction and report it on demand to the authorities.

While this may ensure that identity of the current transactions are revealed, it does not ensure that the ownership of the earlier owners of the Crypto that is now transacted is revealed. Since it is known that almost all of the Bitcoin stock is “Tainted” having once passed through money laundering, it is inconceivable how the tainted asset can be transferred without the accompanying taint without calling it “money laundering”.

Hence the FATF recommendation is to be interpreted that the transaction of a Crypto currency from its root to the current exchange must be made available to the regulatory authorities.

This requirement will hit the fundamental USP of the crypto currency which is the anonymity and hence unlikely to be accepted by the industry.

However the Crypto industry which is an aggregation of dark web participants is unlikely to be concerned with such regulations since they may not have any intention of subjecting themselves to the laws of the civilized society. Their existence lies in promoting Cyber crimes and they will continue to promote money laundering rather than the regulators.

If some G 20 participants fall for any assurance in this regard, they will be the biggest fools in this world. I suppose neither Mr Suresh Prabhu nor Mr Modi nor Mrs Nirmala Sitharaman are fools of this kind.

It may be noted that Mr Sumit Gupta, CEO of Coindcx has admitted and clarified that FATF recommendations are not binding on the members and each member country is free to determine whether to enact the recommendations through legislation or regulation.

The industry representatives have however raised their concerns that there will be a need for a new infrastructure for complying with the FATF requirement and flagged it as a time-consuming and a lengthy exercise.

It appears that several crypto associations signed a Memorandum of Understanding (MOU) to establish an association to “assist in establishing a means to engage with government agencies and the FATF to ensure our best interests are understood and valued at an international level,” the V20 announced. This is an attempt to lobby with FATF to ensure that the standards are favourable to the industry when framed.

Some experts in the industry have opined that since India has already shut down the Crypto transactions and hence the FATF standards have no impact while others try to argue that India has to fall in line with other countries .

It is our clear view that Crypto currencies controlled by private agencies have no role in a regulated economy.

sovereign Crypto is a possibility but its necessity in the light of the already existing wide-spread adoption of “Digital Currency” in India, is questionable.

While the Crypto industry will as a part of its PR exercise try to project every development as a move towards legalization of crypto currencies, Indian authorities may be cautious and not allow the proverbial Arabian Camel which the Crypto currency can turn out to be, to step into the Indian Financial system.

Naavi

The Supreme Court is hearing a petition from the Crypto Currency industry players challenging the April 6, 2018 RBI Circular that disallowed entities regulated by it from providing banking channels to exchanges to trade in crypto currency.

RBI has been firm on its views that Bitcoins and Privately managed Crypto currencies have no place in India. It has even excluded it from the “Reguatory Sandbox” scheme  Had it not been the firmness of RBI, Bitcoin would have been legitimized by this time by the Ministry of Finance.

After much deliberation, the Finance Ministry now seems to have come up with a draft bill “The Banking of Cryptocurrency and Regulation of official Digital Currency Bill 2019” . From the leaked information available about the draft it appears that the Government may  ban Bitcoin but keep its options open on starting its own Crypto currency. It may be called the  “Digital Rupee” (It should better be called the “Crypto Rupee”) which could be a Government/RBI issued Crypto Currency which will be firmly under tracking by the Government.

Such identifiable crypto currency does not fit into the philosophy of Bitcoin and hence the industry will not look at it as a member of the Crypto Currency industry at all. If and when the Government decides to go ahead with this project, we can discuss how it can be done and until then, let us keep this discussion in the backyard.

If the RBI just picks up a Crypto currency algorithm from any  software developer, without itself being able to verify the codes, it will be possible that fraudsters will push a Crypto currency algorithm with a back door which will give them access to the Government Crypto Mint.

This Risk is like a risk where a Mint is constructed where the contractor builds a secret door to be able to walk into the vault any time and lift any currency or gold. Physical construction is easy to check but will the RBI Governor be able to find out a secret door if it is in the Crypto algorithm itself? Hence the project needs a more detailed discussion which can be taken up later when required and not now when only an enabling provision may be contemplated.

The second point that the Bill seems to have highlighted is that except for the Government sponsored Crypto Currency (Crypto Rupee) the private crypto currencies will be banned and any person who may be holding, selling or dealing in such crypto currencies may face a jail term of 10 years.

Possibly this draft bill may be placed before the Supreme Court in the hearing proposed for July 23.

The Court will however be bombarded with the arguments that Bitcoin has already been recognized by some foreign Governments, it is a subject of “Free Speech” ,”Freedom to barter any commodity”, “Instrument of Privacy”  etc. The Supreme Court which always has a weak spot for something couched under the terms “Freedom” and “Privacy” is likely to be left wondering “Why Not” when it comes to a prayer by the industry that the Government should not out rightly ban Bitcoins.

In the process, there is a possibility that the Supreme Court can err and direct the Government to legitimize the Bitcoin in some form.

Naavi.org has been consistently bringing to the notice of the public the dangers of giving any leeway to Bitcoin usage in India. Obviously Supreme Court judges donot read such blogs and even if they read, donot take cognizance of the same. It is left to the advocates to bring it to the notice of the Court.

If representatives of RBI and the Government take note of the same, they can bring it to the notice of the Court during the hearing so that the Supreme Court is aware of the risks to the country if Bitcoin is allowed to survive in India. It would be in the interest of the petitioners to suppress such information and therefore they are unlikely to bring it to the notice of the Court.

For the immediate information of the persons concerned, I will briefly highlight the following issues that the Supreme Court must take into account before passing any judgement in this case.

1. Adverse impact on the Financial Economy

If Bitcoin is recognized then the entire family of more than 1600 crypto currencies with which it is fungible will become “Cash with the public”. The current total estimated market capitalization of all these cryptocurrencies is US$353,020,383,066/-(approx 353 billion or)  (https://coinmarketcap.com/) . This is equivalent to around rs 24 lakh crores which compares with the total money circulation in India which is around Rs 21 lakh crores.

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%. Hence if money accretion goes up by 100%, the inflation level may go up to around 85-90%.

What will the condition of India be if the inflation level is around 90%? is a point which the Supreme Court needs to consider when it adjudicates on the case.

2.  Adverse Impact on the Electricity Consumption

Most people does not understand/or ignore how Crypto currency recognition will have an impact on the energy consumption in India.

We know that Crypto Currencies are created by individuals running a “mining” process for which they run their computers to create a successful new block which can be added to the current block. A successful block consists of the previous block, the list of transactions to be added to the block in the period following the creation of the previous block, a random nonce value that the miner adds to it, the new hash which meets the criteria set by the algorithm, the new bitcoins issued to the miner, the digital wallet identity of the miner etc.

This process involves many many iterations by many many people and the computer has to consume electricity and also generates heat in the process.

A recent study conducted by the Cambridge Center for Alternative Finance at Cambridge Judge Business School, University of Cambridge has indicated that Bitcoin mining consumers around 58.93 TWh per year which compares to 58.46 TWh per year which is the consumption of the entire Switzerland in one year. The Indian power production per year is around 1423 TWh per year. The Bitcoin power usage is therefore around 4.1% of Indian total power consumption and around 0.25% of the global power consumption.

Presently Bitcoin mining is infeasible for most of the individuals and it is running only as an industrial activity in some countries including Iran which was in the news recently. But if Bitcoin is legalized, then there will be a big hike in the mining activity that will spike the power consumption. There will be mining activity in other Crypto Currencies which will be later exchanged with the Bitcoin. Hence most Indians would set their computers to keep running the Crypto algorithm hoping that they would strike gold.

Each block of Bitcoin is today around 210 GB in size and hence all nodes which are involved in mining will keep transmitting such huge data from the node to the central server keeping the data storage industry and the ISPs happy but choking the more productive use of bandwidth and storage facilities.

In many cases, Mining is done through “Cryptojacking” where “botnets” are created by planting trojans in the computers of the public and using their electricity and computer resources to mine bitcoins for a remote cryptojacker. The computer users are suffering today by the slowing down of their computers, increased heating of their processors and corresponding reduction in the life of the computing devices which is going unrecognized as a disguised damage created by Bitcoin.

It is for the Nation’s power minister Mr R.K.Singh to clarify how the Country would respond if the Supreme Court legitimizes Bitcoin and causes a big spike in the electricity consumption in India leading to shortfall in electrification projects.

The heat generated in the process if released to the atmosphere will contribute to the global warming and a separate research is required for harnessing this heat energy if the global warming has to be contained. We are still a long way from such research in India and hence have to put up with the consequences of the warming generated now.

3. Adverse Impact on National Security

The the identity of the digital wallet in which the crypto currencies are held is anonymous. The wallet addresses are managed by international wallet service providers who are not within the jurisdiction of Indian law enforcement. Even when “Data Localization is mandated” through PDPA, the wallets will continue to be just “addresses” and managed by international anonymous dark web players.

Within the blocks also the bitcoin owners are represented only by their wallet identity.The wallet address  is a public key and no name or address of the miner is visible in the block. The person who holds the private key corresponding to the public key of the digital wallet will be able to encash the bitcoins credited and convert it into legit currency. It is more or less impossible to identify the wallet holder except when the wallet service provider shares the wallet creation data through which some tracking can be attempted.

Hence the bitcoin holdings will remain anonymous and outside the reach of the law enforcement. Even when the first transaction of conversion from a legit bank account to a digital wallet through an exchange is traceable, subsequent transactions from one bitcoin wallet to another is outside the radar of the law enforcement as well as the taxation authorities.

The biggest risk comes from the fact that bitcoins and other cryptos can be used by terrorists to fund terrorism in India. It is already being used as the currency in which kidnap ransoms as well as ransom ware ransoms and crimeware sales happen. The darkweb uses it as the only currency and the entire cyber crime industry is run through the use of Cryptos. If the Cryptos are made acceptable in the physical world or in Amazon type of platforms, then there will be a circulation channel for illegal money to render it as a tool of money laundering and havala. This will make the law enforcement work of tracking the money trail in frauds and corruption impossible.

If therefore the Supreme Court renders legitimacy to Bitcoins, it will kill the efforts of the Government to control black money completely and the National Security agencies to disarm the financial strength of both the Terrorists and the Naxalites.

Any bench of the Supreme Court that takes such a decision will carry the moral burden of all deaths and destructions that may occur in future from terrorist and Naxal activities.

4. Anonymity is a recipie for Scams

The biggest USP of Bitcoins is the anonymity. But this is also the biggest weakness for the holders when it comes to a scam where the bitcoin wallet company or the exchange or the new Crypto Coin issuer himself commits a fraud by vanishing into thin air or declaring that their servers were hacked and the information is lost.

Such Scams are difficult to prove and the investors mostly have to lose their Crypto holdings.

For all these reasons and more, I would like to say that the Supreme Court has to be aware that any decision to legitimize the Bitcoin as a currency either in the final judgement or the comments the judges pass during the hearing would create a damage to the fundamental fabric of our society.

No doubt this is the intention of the “Tukde Tukde Gang of India”. But we hope that the judges of the Supreme Court would see through the arguments of the petitioners and understand that what these people are suggesting is not in the interest of the country.

If the Supreme Court is honestly in favour of the well being of India, then they have to dismiss the petition and not force the Government into a regulation that is counter productive.

If the Supreme Court is not firm in denouncing Bitcoin, it will warm the hearts of the Modi  baiters, but the public of India will be deeply disappointed with the Supreme Court.

Naavi

As the new Finance Minister in India takes over the reigns of managing the economy,  the Bitcoin industry has scaled up its efforts to some how bring in some semblance of regulatory recognition to Bitcoin and leaving no stone unturned to reach its goals.

Three events will attract attention on Bitcoin and Crypto currencies in the immediate future in India. They are

1.On July 23, the honourable Supreme Court is said to hear a petition.

2. On July 27, Alliance University, Bangalore will host the Bangalore Blockchain summit

3. On September 5th and 6th National Police Academy is set to conduct a two day “Educational” program on Crypto currency

Naavi.org would like to place its views before the public on each of these three events so that these views are not ignored in the discussions.

Supreme Court has to avoid a Trap

Supreme Court has in the past projected a face of opposition to Black money in India. It is well known that Bitcoin or Crypto currency in general is a representation of “Digital black Money” and hence any view expressed by the Supreme Court is a view against “Legitimization of Black Money”.

 All the opposition to Aadhaar and the support to Bitcoin that some activists are expressing and expecting support from the Supreme Court is a result of the fight of the Government to reduce black money. The moment Aadhaar was to be used to fight “Benami” properties, it was attacked as if it was the greatest evil legislation in India. The Supreme Court went along with this view almost till the end though in the final stage yielded to the Government a leeway. Now with the new Aadhaar legislation, there is some calm that has descended on the Aadhaar front.

But the support to Bitcoin legitimization continues to be fought on all fronts and at present there is some concern that the Supreme Court  may be manipulated by clever lawyers to come in support of Bitcoin.

In all our discussions, we need to remember that “Bitcoin” and “Crypto currency” has to be seen as indistinguishable since the 1000+ crypto coins are convertible with Bitcoin and hence recognition of “Private Crypto Currency” of any description will automatically provide recognition to Bitcoin. Hence all our discussion on “Bitcoin” is relevant for other Crypto currencies such as “Ethereum”,  Ripple, Bitcoin Cash, EOS or others.

The discussion on “Blockchain” is often used as a cover to promote Bitcoin and hence “Legitimizing Blockchain as a technology” is often a proxy discusssion on “Legitimizing the Bitcoin” and we need to keep this in mind.

We also need to remember that “Regulating” is possible only after “Recognizing”. It is not possible to regulate Bitcoin without first recognizing its existence. Once RBI or the Finance Ministry accepts that there is a need to regulate crypto currency, they will have to start with a deemed acceptance that Crypto Currency like Bitcoin is deemed as “currency”.

What is not recognized cannot be legitimized. What is not recognized cannot be de-legitimized as well.

Hence the Supreme Court should be wary of making any comments either in its order or on the comments in the sideline that could be taken as its support to Bitcoin.

If the discussion is Crypto Currency as a “Currency”, the one line judgement is that

“Any instrument that is deemed to be a “Currency” is the exclusive preserve of the RBI in India and any person exchanging any “commodity” as “Currency” is deemed to commit an offence against the State”.

In as much as introducing a parallel currency in the country will de-stabilize the economy, it is anti-national activity. In as much as Bitcoin or other Crypto currencies are used as the currency of  Cyber Criminals, as Currency of Terrorists, any dealing with Crypto Currency should be deemed as an act of terrorism and dealt with legally in that perspective.

Mrs Nirmala Sitharaman as Finance Minister and Mr Amit Shah as Home Minister and Mr Ravishankar Prasad as Law and IT Minister needs to recognize their individual responsibilities in convincing the Supreme Court that the Court in its ignorance should not legitimize this tool of terror.

Alliance University may endorse the digital Tukde Tukde Gang

The Blockchain summit 2019 in Bangalore is being hosted by a private university namely “Alliance University” and organized by KPI Consuling Services Pvt Ltd and is supported by a host of industry players. There will be discussions on “Block chain technology” as the Next Gen technology with a special emphasis on it being a platform for Crypto Currencies.

In the course of the discussions, the virtues of Bitcoin and how the Indian Government talking of 10 year imprisonment for dealing with Bitcoin etc will come for discussion.

What may start as a technology discussion may actually end up as a camouflaged attack on the Indian Government blocking the legitimization of Bitcoin. In this respect the summit has the potential of turning out to be like the JNU meetings that turned out to be a call for breaking up India.

Bitcoin and Crypto currency is an instrument of the break up of the Indian financial system and  a means of terror funding and hence any promotion of Crypto Currency would be an endorsement of the Tukde Tukde gang.

It is therefore essential for the organizers to ensure that the discussions, deliberations and recommendations during the summit does not cross the boundaries of Blockchain as a technology and Crypto currency as a Currency substitute.

I wish the RBI and the intelligence agencies send their observers to the summit to keep track of what the industry is upto.

If a “University” has to be engaged in an activity such as promoting “Blockchain Technology” then there should be discussions on the adverse effect of Crypto Currencies on the environment by highlighting the power consumption by the industry. It is alarming to know that even at present Bitcoin mining industry consumes more energy than a nation like Switzerland as indicated by a recent study.

At present Bitcoin accounts for roughly 0.25 % of the world’s entire energy consumption. If there is a legitimization of Bitcoins in India and everybody starts mining some form of Crypto Currency, then this power consumption will break the backbone of India. As an academic institution, Alliance should be concerned in such aspects and ensure that the summit does not gloss over the concern.

Similarly, as an academic institution, Alliance should be also concerned of the effect on the financial structure of the country and its economy when the entire market capitalziation of Crypto Currency comes into the liquidity in the country and adds to the physical currency in circulation and how it affects the inflation and legit currency value.

I am reasonable sure that the organizers of the summit would not focus on such issues which are a real concern for the society. The Alliance University on the other hand should be concerned about these issues more than the commercial aspect that Bitcoin price is Rs 7 lakhs today and may go up further etc.

I request the Vice Chancellor of the Alliance University to keep a close watch on the deliberations and ensure that what happens in the summit is a healthy debate on technology and not a promotion of Bitcoin.

I request journalists in Bangalore to who attend the event to take note of this and cover the event appropriately ignoring the free Bitcoin coupons that would be showered on all the participants during the event.

National Police Academy needs to focus on Crypto Crimes

In the light of this background if we look at the proposed “Course on Crypto Currencies” that the NPA has planned for its senior officers, there is a need to raise a concern whether there is adequate focus on “Crimes related to Crypto Currencies” in the course.

It is accepted that without knowing what “Crypto Currency” is, Police cannot understand how to investigate Crypto Currency crimes. Hence, the course to understand Crypto Currency is essential.

We are however not aware of the details of the two day course and the emphasis that it lays down on the “Misuse of Crypto Currencies”.

At present “Cryptojacking” is a serious concern of the industry and huge losses are occurring to individuals and organizations by the malware that hides inside many computers and works as a botnet mining crypto currencies for others.

Such Bitcoins mined in India are going out of the country and therefore constitute “Virtual Smuggling”. Bitcoin ATMs are being set up as “Virtual Havala Centers”.

Bitcoins are bought and sold for extortions both in physical kidnapping as well as ransomware and are therefore the “Currency of the criminals”.

Dishonest businessmen are committing frauds using Bitcoin as a bait and setting up exchanges only to declare a “hack” later to leave the holders of the crypto currency high and dry.

The involvement of so many criminals world over in the Bitcoin industry has made it easy for some of these criminals to set up wallet agencies and exchanges and later hack into the same making the entire Crypto Currency industry completely unreliable.

The managers of Crypto currencies have not been cooperative in any investigation and the Police will find more than normal resistance in investigations that involve Bitcoins or other crypto currencies. If bitcoin is legitimized, it will become even more difficult for the Police to investigate

Anonymity is the main selling point for Crypto currencies and hence tracing the Crypto Currency transaction will never be supported by the industry. Breaking the encryption forcefully is an impossibility.

Hence if the Police allow the entry of Bitcoin in any form of legitimacy, tracing the use of crime funds becomes an impossibility. If this continues to be a requirement of criminal prosecution in cases of frauds and corruption, then the criminal justice system will fail.

I wish the NPA understands the dangerous consequences of Crypto Currencies and not allow itself to be sweet talked by the industry that Block chain is a great technology.

I wish the concerns expressed above are taken note of by the Government of India if it is serious about eliminating Black money in India.

Naavi

Reference Articles:

India addresses cryptocurrency scam wave with new police training course

India to Educate High-Ranking Police Officers on Cryptocurrency

Bangalore Blockchain summit 2019

There are several earlier articles on this site  which may be also researched by interested persons.

The Aadhaar Amendment Bill was passed by the Rajyasabha today and brought in many important changes that would off set the restrictions that the Supreme Court had placed on the use of Aadhaar.

The main objection of the Supreme Court was that Aadhaar should not be used by the private sector since it could compromise the privacy of the individual. Even during the time the Supreme Court considered the objections raised by the opposition that sought to attack the Aadhaar scheme as a proxy attack on Mr Modi, UIDAI had introduced the “Virtual Aadhaar ID” as well as offline authentication. If these had been considered by the Supreme Court, at the time of its earlier decision, it would not have been necessary for the Court to send shock waves through the industry by banning the use of Aadhaar by private sector.

Now in the amendment, the Virtual Aadhaar ID  has been also recognized as the “Aadhar Number” making it usable instead of the original aadhaar number. Since the virtual Aadhaar ID can be changed from time to time, the user can use different Virtual IDs for different transactions and protect the real ID.

The system of “Offline verification” has been defined as a process of “Verifying” the identity of the Aadhaar holder without authentication.   The system which UIDAI has implemented requires the Aadhaar holder to download the Offline e-KYC document and submit the same to an agency which needs to conduct a KYC. The document downloaded is an XML document with the digital signature of the UIDAI which should be used by the verifier. Where demographic information is shared the user will be obligated not to use it for any purpose other than for which it was provided.

Further the Aadhaar holder can voluntarily use Aadhaar number to provide his authentication to the user agency based on an “Informed Consent”. This enablement will meet most of the requirements of the user industries though the Privacy Activists may still raise issues of whether an “Informed” consent was obtained or not. Once the PDPA comes into effect, the agency using the Aadhaar number for authentication will have a larger responsibility as a “Significant Fiduciary”.

The Act will by a regulation mandate user agencies that would use only a Virtual Aadhaar ID and not the main Aadhaar ID. It is expected that most of the private sector players may be placed under this mandatory use of Virtual Aadhaar ID which should satisfy the Supreme Court on the Privacy protection. This notification may come as rules that will follow.

The Aadhaar authenticating agency is also expected to indicate alternate measures other than the use of Aadhaar for the purpose of authentication and does not make it a mandatory condition for delivery of any service.

The Act also makes some changes in the penalty clauses to deter any misuse. Disputes would be settled through Adjudication followed by the appeal with TDSAT.

Additionally the amendment to the Telegraph Act indicates that the Telecom operators may use the Aadhaar as a means of authentication for their services. This will be part of the telecom licensing provision as if it is a special category of license. It is expected that the TRAI will specify further safeguards as may be necessary when licenses are issued with the use of Aadhaar as an identity parameter. It appears that the current license holders may have toseek for a special endorsement for the use of Aadhaar agreeing to whatever additional conditions that TRAI may place.

In summary, it can be stated that one of the dark phases of Aadhaar usage has perhaps passed off. Hopefully the Fintech industry which had been severely hit by the Supreme Court judgement can feel more comfortable now.

(P.S: This is the immediate impression on the Bill as passed and may need a review when more details are available)

Naavi

Whenever a fraudulent withdrawal occurs on a Bank account, it is a common practice for the Bank to allege that there was a phishing mail which the customer answered and therefore he has compromised the access credentials to the account and responsible for the unauthorized access and the consequential loss.

The limited liability circular of RBI also limits the protection under the automatic zero/limited liability on reporting of a disputed transaction within the specified time only to cases where there are no “Proof” of the customer sharing the payment credentials. In such cases the scope of the circular is limited to the debits that occur after the reporting. The “Burden of Proof”  of sharing of payment credentials have to be provided by the Bank.

In a practical situation it so happens that when an incident of fraudulent withdrawal is noticed, the customer is under a panic situation. He first calls the Bank to tell them that he is either not able to access the account or the balance in the account is less than what it should be.

In such cases, the complaint is registered and a number is allocated which needs to be kept safely as evidence of reporting (Naavi has suggested using the service of CEAC for sending such notices to bring a trusted third party evidence into the equation).

Normally in the subsequent discussions, the Bank will advise the customer to file a Police complaint and follow the incident with the Police as a crime against the customer.

The Bank in the course of the conversation may also ask “Have you received any mail recently from the Bank asking for your password? ” or “Did you give your OTP to any body” etc.

If the customer has received a mail which we normally refer to as the “Phishing Mail” or a “Vishing Call”, he will say he has received. Some of such customers may say that they had received such communication but they did not respond.

This conversation is normally recorded by the Bank but not the customer. Hence the evidence of this conversation is available with the Bank but not the customer.

The customer often goes to the Police and files a complaint making the unknown fraudster as suggested by the Bank as the accused and does not include the Bank as the main accused or as a person who has abetted the crime.

We have recently come across an allegation by a customer that the Bank asked him to delete the phishing e-mail and he deleted it. Later in the judicial proceedings it has  become an evidentiary requirement.

During the proceedings in the Court, the Bank may simply deny that it has asked the customer to delete the mail and the customer will be left high and dry to prove that he is speaking the truth.

As a general warning to the Bank customers who may be victims of frauds, I would like to therefore request that they should not delete the phishing e-mail. It is a potential evidence of an attempted crime even when no loss occurs and is actually the evidence of crime if the fraud happens. Deletion is removal of evidence and is punishable under Section 65 of ITA 2000/8 and Section 204 of IPC.

If the bank suggests this, the bank is guilty of destruction of evidence or an attempt to fraudulently mislead the customer to commit such an offence.

Further the Customer should request the Bank to produce the recording of the conversation to prove or disprove whether there was such a phishing e-mail etc. Bank is bound to provide such evidence or shall admit that it itself is liable for destruction of evidence since the recording itself is an evidence.

Customer should insist that the Bank produces the recording as a Section 65B (IEA) certified evidence as otherwise there is a possibility of tampered evidence being produced.

Further even when the Limited Liability Circular fails to protect the customer, it does not foreclose the legal options of recovery which is through Adjudication where the customer may still hope for a remedy even in case of the so called phishing.

This is for the general information of the public.

Naavi