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Building a Responsible Cyber Society…Since 1998

Whatever was the technological urge for Mr Satoshi in  creating the block chain technology and Bitcoin is a thing of the past. The present status of Bitcoin is as a currency of the criminals. Many of my friends may hate me for saying this but I would like to say Bitcoin today is a currency of the criminals, by the criminals and for the criminals. It is not for honest individuals. It could have been at one time..but not today.

All Bitcoin holders are not criminals… but they could be

This is not to say that all those persons who possess Bitcoins today are criminals. But Bitcoin as a commodity and used as a currency is a product meant for criminals. If honest persons want to also use it, it is their choice.

(Ed: Reminds me of a Kannada proverb: “ಈಚಲ ಮರದ ಕೆಳಗೆ ಕುಳಿತು ಮಜ್ಜಿಗೆ ಕುಡಿದಂತೆ ” meaning “Like sitting under a palm tree and drinking butter milk” )

Bitcoin is the Perfect Black Money

There is a wide support for Bitcoins in India and the support is not surprising at all considering that India is a leading country in the world when it comes to corruption and Black money.

Bitcoin is a “Perfect Black Money” because it is anonymous and transferable across the globe at the click of a button. Just as an e-mail flies across, lakhs of rupees can fly across from India to another country either to one’s own account or to somebody elses’s account.

A Bitcoin wallet which can hold multiple Bitcoin addresses or a simple Bitcoin address for a single transaction can be created as easy as signing up for an e-mail account without any KYC formalities. Money can be transferred into this wallet or address by buying Bitcoins in cash or through bank account or through cards or through western Union or Paypal. If money is transferred through Bank account then there may be a KYC and identification. But there are other means that the black money people know which can easily convert their black money into Bitcoins.

It is therefore correct to call Bitcoin as the “Perfect Black Money”.

Bitcoin is also instantly fungible into 1317 (as of Dec 31, 2017)  other crypto currencies at a click of a button and also convertible into a few legit currencies in the world.

Hence there is no doubt that many Indians including many in the Government bureaucracy and in regulatory agencies are very much in favour of Bitcoins being legally recognized so that all their ill gotten wealth can be held in the “benami numbered account” called  Bitcoin addresses or wallets. Each transaction can be in a different Bitcoin address and for much less than 1 bitcoin (1 bitcoin can be  reduced into units of bitcoins starting from a Satoshi  which is 1 bitcoin divided by 100 million).

As it is, Bitcoin addresses are anonymous since they are public keys associated with private keys of a crypto key pair and the owner holds the private key confidentially. Whoever knows the private key is the owner of the bitcoin. If one wants to transfer the bitcoin, to another, he can do so simply by transferring the bitcoin in his control to another bitcoin address or wallet whose private key is known only to the transferee.

What more do you want to call Bitcoin a “Perfect Black Money” and a darling of all those who support black money and corruption in India?

All this is being explained here not to make people knowledgeable so that they can adopt to the use of Bitcoins to hide their black money. if this happens, it would be a tragedy.

Have you been already poisoned?

But the reason I am putting out this post in public is to tell our decision makers in the Government of India including Mr Modi, Mr Amit Shah, Mr Arun Jaitely and others that when you hear some experts saying that Bitcoin is great, Block chain technology is even greater, that country and this country has legalized Bitcoins etc and try to coax you into believing that all those who are opposing Bitcoins are either technology sceptics or jealous of others who are making money etc, please donot believe them. Many of them might have already asked you to have a “Free Trial of Bitcoin technology” and created an account for you and loaded some bitcoins in your account already. Remember that this is “Poison” and if you touch it, you will be consumed by it.

If you are still not touched by this poison, please come out boldly and confirm it to the citizens of India. Otherwise we will presume that you are all already posioned with Bitcoin.

Why Bitcoin is a currency of the Criminals, By the criminals and for the Criminals?

Bitcoin was created by the criminal syndicates of the dark web who sell crime ware, viruses, conduct ransomware attacks, extort money, sell drugs and illegal arms both offline and online. They obviously donot want any central authority to know of their transactions and hence prefer to deal with Bitcoins. Mr Satoshi who remains anonymous till date could be the biggest crook of all and posing himself as a technologist created an infrastructure for criminal funding.

The entire eco system of Block chains was created to support criminal activity and along with the spread of cyber crimes, the popularity of Bitcoins and other crypto currencies as well as the underlying technology respectably called the innovative “Block Chain” grew. Blockchain is the alter ego of Bitcoins and many believe that if Block chain technology is pushed into the main stream then Bitcoins will automatically survive and grow.

Bitcoin itself is a creation of the software and there is no physical currency or backing of a reserve or a Government promise. But it is being traded at a value of Rs 13-15 lakhs per bitcoins. Now a “Derivative of the Bitcoin” is being created which is another level of imaginary “virtualization of the virtual” with a value proposition for the gullible to pick up. It is a “bubble of bubbles” in another perspective and could burst along with the Bitcoin bubble one day ..unless the world is full of people who want to live in the dream of bubbles. There are many such people around now and they are their tribe may even grow further.

We also note that already Bitcoin block chain has hard forked once and it is anticipated that a third fork is likely to form soon. What it means to the bitcoin value, only future will unveil.

Those who are promoting Bitcoins in this uncertain environment are only trying to fool others and make money. Hence the system is full of criminals.

It is therefore not surprising that Cyber Criminals in the dark web transact only with Bitcoins (or its fungible new versions like Monero or Ripple etc, which may be more secretive than Bitcoins and better for Black money holders).

Since there are only Criminals who are technologically savvy who are working around these Crypto currencies, they also indulge in ICO scams, hacking int Crypto currency exchanges, creating malwares for mining bitcoin/crypto currencies and embedding it into softwares, apps, IoT applications etc so that all of us will use our data and devices to work as slaves and mine cryptocurrencies silently for the criminals as part of the Crypto botnet.

Is Government of India unaware of this?

I would not believe that Mr Arun Jaitely or the Finance Secretary or the SEBI Chairman or the RBI Governor is unaware of the fact that Bitcoin is a “Perfect Black Money” and hence it is great for politicians and other black money holders.

But Government strangely says that “They are Observing”… Observing what?.. the speculation where 4-5 lakh members of the public have already invested in bitcoins through the exchanges? We can  note that these are innocent persons who have given their KYC and received notices.. this does not include those who have opened Bitcoin wallet account with agencies outside India including in Singapore which is developing into a hub of Bitcoin exchanges even for Indian entrepreneurs.

What the Finance Ministry is doing in being a silent supporter of speculation is absolutely unacceptable. They are deliberately not taking action to ban the use of Bitcoins. Chairman of SEBI is publicly in favour of Bitcoins. Ministry gives out conflicting statements now and then so that speculation thrives. RBI appears to be against Bitcoins but seems to have been kept silent by the Finance Ministry.

I want Mr Modi  to show his commitment to removal of Black money in India by immediately taking up a total ban on all Privately created Crypto currencies like Bitcoin, Ripple, Etherium, Monero etc…

Mr Amit Shah may kindly note

If Modi Government does not ban Bitcoins and Crypto currencies, it will appear as if the Government has developed a cold feet in its fight against Black money and corruption. It will lose the moral authority to say that they have done everything to root out Black money.

This  matter may come to haunt BJP in its next election in Karnataka where they have to explain why BJP was interested in demonetization of physical currencies only and are not willing to demonetize the crypto currencies?….

Security Issues

Apart from the issue of Black money creation, recognition of Bitcoins in India will bring in a market capitalization of over Rs 36 lakh crores of money into the floating currency in India and could completely upset the economic stability of the country.

Most of this Rs 36 lakh crores would be in the control of our enemies including China and ISI and will be used to fund terrorists in India. It will be impossible to trace the ownership and transactions of these currencies and our law enforcement persons will be looking like bakras when they have to prove “Money Trail” in Courts in corruption and criminal cases.

Criminals will go scot-free and Terrorists and Naxalites will be able to get funds easily for their operations to break India.

This is the future of India if Bitcoins are not eliminated from the Indian scenario forthwith.

History will Judge Mr Arun Jaitely

Mr Arun Jaitely will go down in history as the person who by his inaction to ban Bitcoin caused the country to collapse.

Will he or Will he not? …ban Bitcoins and all Crypto currencies…. now or when? will be the question.

Dear Finance Minsiter, Do you have a response?

Easy Way to ban Bitcoins and Crypto Currencies

If Crypto currencies are declared as “Benami Properties” since it is held in anonymous identity, dealing with them becomes illegal ab-initio.

Also ITA 2008 provides certain encryption guidelines which the Currencies violate and hence they are already not legal.

All so called Bitcoin exchanges in India are operating without either RBI or SEBI clearance whether they follow KYC or not. They are illegal operations ab-initio.

Projecting anything as a “Currency” violates the RBI Act and is punishable. Marketing of Bitcoins  as a “Currency”, is therefore illegal per se.

We only need the Government to use these existing provisions of law and these Crypto currencies can be eliminated. …

Where there is a will, there is a way. But Government appears to be only trying to find a way out for the criminals rather than punish them in the interest of the nation. Kindly prove me wrong.

Our fight against Bitcoin continues….. 

PS: It is surprising that the media and even Mr Subramanya Swamy is silent on Bitcoins. We can understand the reluctance of the media but why Mr Swamy is silent?.. We await his clarification.

Naavi

Earlier Articles

PS: It is ironic that Google Ads may be serving ads on Bitcoin on this site even as you are reading. I donot endorse those ads.

Naavi

 

In a surprising but disgusting news report, Mr Ajay Thyagi, the Chairman of SEBI has come up with a public statement that is intended or likely to move the price of Bitcoin in the Exchanges.

Contrary to the popular opinion,  Mr Thyagi has stated

“Virtual Currencies have not posted any systemic risk to the economy”

“Government Panel is currently looking into the regulation”

Mr Thyagi was speaking at a CII summit when he made these statements. It must be remembered that Mr Thyagi represents SEBI which is the regulator who has so far failed to take any action against the Bitcoin exchanges which deal with the commodity called “bitcoin” without either the sanction from SEBI or from RBI.

By referring to Bitcoin and Virtual currencies as “Currencies”, Mr Thyagi has clearly represented them as “Currencies” which can legally be issued only by RBI. Any commodity touted as “Currency” though not recognized by RBI is just a “bit of paper” (In this case bit of electronic paper) and when value is placed on them, it is pure “Speculation”. The SEBI Chairman is fuelling such speculation and supporting Bitcoins through his irresponsible utterances. The statements can also be challenged as factual inaccuracies or clever manipulation of words that “At present Bitcoin is not a systemic risk” without saying that “In future it can be”.

For a regulator to refer to Bitcoin in a public meeting and to make a statement that Virtual Currencies have not posted any systemic risk to the economy is the height of deliberate misrepresentation to the public.

Bitcoin is an “Anonymously held value proposition” and is being used as a replacement of legit currency.

Can Mr Thyagi deny this?.. if he is put on a witness box in a Court?

If Bitcoin is a value proposition that can replace legit currency like Rupee, how can anybody differentiate it from “Black Money”?.

Mr Thyagi has by making such a statement said something to the effect “Black Money has not posed any systemic risk to the economy”.

Mr Modi and Mr Jaitely should take note of this.

This is absurd. If Mr Thyagi was not speaking from his regulatory position but as a representative of a  Bitcoin start up, his words would have sounded more honest. He needs to immediately clarify his position and in case the media has not represented him properly, he should state so.

Further by stating that the Government Panel is looking into regulation, Mr Thyagi has made it clear that a final view of how to treat Bitcoin has not yet been taken by the Government. This is fuelling the speculation that Bitcoin can still be recognized and will move the Bitcoin price upwards. In the recent days, the move of income tax authorities to ask for information from traders of Bitcoins in India had shaken the market a little and the statement of Mr Thyagi is meant to bolster the market.

It now appears that SEBI is one of the stumbling blocks in preventing action by the Government against Bitcoin. It may be recalled that Naavi.org had pointed out earlier in May 2017 that MCX which works under SEBI was indulging in “Insider Tampering” of the decision of this Government panel (Please read : Is MCX of India involved in insider tampering of the Committee on Bitcoins?.. Directors, Please answer) by posting some supporting views on the MCX letterhead when the Government had called for public opinion on Bitcoin regulation last year. At that time we had demanded an explanation from the Board of Directors of MCX. Subsequently the recommendation was taken down but SEBI did not take any action.

It is now clear that the attempt of tampering of the Panel decision by posting an opinion of MCX in the public forum had the blessings from the highest officials of SEBI.

It is now  not possible to trust SEBI with any credible regulation of Bitcoin Exchange as it has spoken against the RBI and openly supported the Bitcoin community.

SEBI Chairman’s statement  is against known fact that Bitcoin and Virtual Currencies are the “Currencies of Criminals” and is “Black Money” in virtual form whose identity is hidden by encryption so that the holder of Bitcoin cannot be identified and that It can be moved across borders like data and cannot be identified when it moves in and out of the country in the form of data and enables Indians to convert their wealth either in Indian currency or in Foreign currency to Bitcoins or other virtual currencies.

In this context, Mr Thyagi should immediately

a) Declare his holding of Bitcoins even if he wants to say that he does not hold any Bitcoins himself.

b) Resign from his position as the regulator since he has ignored the fact that there are “Exchanges” working in the country, trading in the commodity called “Bitcoin” without license from SEBI and he has failed to take punitive action.

I request Government of India to take immediate action in this regard to ensure that Mr Thyagi is replaced as SEBI Chairman.

Naavi

A good news is flowing through the media about Bitcoins. It is that according to news reports,  “A Government Committee has recommended that all Crypto Currency Exchanges” in India are set to be closed.

Business Today says ” Crypto Currency dealers may face closure in India even as Bitcoin reaches new high of $7000″

Cointelegraph.com says “ Ban All Crypto Dealers, India committee reportedly tells Government”.

Economic Times says : War on bitcoin?.. Govt Panel seeks crackdown on cryptocurrency dealers in India

Moneycontrol.com says: Govt panel recommends shutting down cryptocurrency dealers in India

It is clear that multiple news media have received the information though there has been no official announcement as such.

We are happy with the development but we donot want to count the chickens before the eggs hatch. There is still a need for an official announcement since there is  continued lobbying by the vested interests in getting Crypto Currencies going in some form.

What the press report indicates is just the first step where it might be stated that under the SEBI Act, the dealing in the commodity called “Crypto Currency” has not been licensed as a “Commodity” and hence all forms of dealing is per-se illegal.

There was no other way this could have been treated.

What this notification achieves is that local trading against cash payment and even bank transfers will stop.

Some “Experts” seem to be stating that

“banning cryptocurrency dealers or exchanges would not work”

“Instead of closing cryptocurrency dealers, the government should take steps to curb buying and selling of bitcoins or cryptocurrencies in cash. This move can reduce illegalities in the country”

“…in case of closure of domestic cryptocurrency exchanges, buyers will start buying them from foreign exchanges”

….so says Hesham Rehman, CEO & Co-founder, Bitxoxo, a bitcoin exchange operating in India.

I am sorry Mr Hesham Rehman, nothing short of complete banning of Bitcoins and all Private Currencies would satisfy the needs of our country.

We have taken a vow to eliminate black money from India and Mr Modi has taken a great risk to his career by demonetizing currency last November 8. Bitcoin or any other form of Crypto currency is just another form of Black Money. They have to go.

Preventing conversion from cash will only address a small part of the issue. We donot want accountable Bank funds to be converted into unaccounted Bitcoin or Crypto currency form. This will only help criminals and terrorists to run a parallel economy and weaken our economic fabric.

I donot accept the contention that banning Crypto currency is difficult or will be ineffective since people may switch to foreign exchanges. Let them do. Dealing with any foreign exchange will directly attract FEMA and violations can attract higher penalty. Also, a number of Indians are wary of dealing with foreign exchanges and there will be a significant drop of Bitcoin patronage because the direction of the policy will be set with the current move.

We know that criminals will not abide by law and continue to deal in corruption or dealing in drugs or engaged in terrorism or Naxalism even though they are declared illegal. Similarly Bitcoin will continue to be used by some even after the ban. Let them face the law.

I therefore see no reason to show any mercy on Bitcoin or Crypto Currencies (other than a sovereign Government sponsored systems if any) and it must be banned fully.

I therefore urge the Government to go the full distance and announce the “Demonetization of Bitcoin and all other Private Crypto Currencies” with immediate effect.

Other measures that may be required are:

  1. Two days time may be given for any current holders to declare their Crypto Currency holdings and convert them to INR.
  2. Non declaration should result in impounding of the balance and possible punishment under the money laundering legislation.
  3. Conversion should be subject to taxes as may apply to buying and selling of commodities.
  4. Holding of Crypto currencies beyond this cooling period of 2 days should attract more penalty.

Let us continue our war on Bitcoins until the roots are plucked out…. (As per Chanakya’s theory)

Naavi

 

OPEN LETTER TO RBI AND ECGC

To

Reserve Bank of India
Exchange Control Department
Mumbai
and

ECGC of India
Mumbai

Sub: Increasing Hong Kong Risk for Importers and Exporters from India

Dear Sir

I have recently come across two instances of Cyber Frauds which have been targeted at the Importers and Exporters from India which involves Hong Kong as the center of money laundering where the money due to be paid to the Indian businessman was diverted into a false Bank account in Hong Kong. One of the cases involved an importer importing goods from China and another involved an Exporter exporting to Russia.

In both cases, the fraudsters sent e-mail communications to the paying party impersonating as the receiving party and asking the payment to be made to the credit of a Hing Kong Bank account instead of what was originally agreed to.

As a result of these two instances alone, a sum of around Rs 135 lakhs in foreign exchange has not been received by India. The Exporter would now face a loss which will be a liability on the ECGC. The importer has made a payment in foreign exchange without a corresponding import of the equipment leading to his facing liabilities under FEMA.

I consider that these are not isolated incidents and are also not the only two incidents that have occurred. I suspect that all over India by this time several such incidents must have taken place and this will result in huge losses to ECGC besides many of the genuine Importers and Exporters. This will also lead to a higher NPA incidence at Banks.

There is therefore an urgent need for both RBI and ECGC to take remedial action including a criminal action against the fraudulent parties in Hing Kong. Such action cannot be undertaken by the individual parties and has to be front ended by ECGC. The Government of India also need to take up the matter with the respective countries namely Hong Kong, China and Russia since there is a distinct possibility of involvement of local employees of different organizations in each of these countries.

I request RBI and ECGC to immediately caution all exporters as well as Banks about this new modus operandi of Cyber Criminals and advise remedial action.

If more information is required on the two cases referred to from here which are from Bangalore, the organizations may contact me.

Regards.

Naavi

New Banking Licensees- Beware of IT Companies who want to trap you.

Posted by Vijayashankar Na on July 9, 2013
Posted in BankCyber CrimeRBI  | Tagged With: , , , , , , , | 1 Comment

RBI has now invited applications for new banking license from private sector which has attracted 26 aspirants to make an application. Many of these are thinking of building their Banking empire on the edifice of technology.

Already, Indian Banking system has become extremely “Technology Dependent”. In fact RBI is making it mandatory even for RRBs to run on “Core Banking Platform”. RBI looks at Core Banking Software systems as a means of better information collection which may help RBI in the administration of its monetary policies. However, in the process RBI is forcing a banking platform which is unfamilar to the Bankers unmindful of the unsafe nature of the software.

The “Eurograbber” risk that has resulted in more than 36000 banking frauds across the European countries and is threatening to enter India. Once it hits the Indian shores, it can destabilize even the strongest of the strong Banks who are operating in India at present.

At this time the new Banking entrants appear to present an even higher risk for the Customers than the existing Bankers since their technology dependence is expected to be higher.

One of the reasons why these new Banks will be more technology dependent is that they will chase profits in a competitive world as late entrants they need to make money by being more efficient. This of course is a good strategy and perhaps even inevitable.

Even before the applicants can be sure about getting their licenses, the IT Companies are already behind them to sell their “Core Banking Applications”. Some of them may even like to be called “Partners” is setting up the new Banks. This again is a genuine marketing activity and is to be expected.

However in the process of listening to the high profile marketing pitch from IT Companies, the new Banks should be aware of the dangers of setting up their Banking entity as a dependent entity on the technology platform supplied by the IT Companies.

We must remember that all these companies are supplying “Core Banking Systems” that have not only failed to stop the Euro grabber type of Trojans but are also not cyber law compliant since they are using “Password based authentication systems” instead of “Digital Signature Based authentication systems”.

Since many of the new Bank license applicants are not fully conversant with the Information Risk environment in the Banks and at least some of them are new to the Banking system itself, they could end up becoming over dependent on the software in driving their Banking business.

Bankers should understand that it is not Infosys or Oracle or Tata Consultancy that will determine how the Banks need to carry on their Banking activities. IT is only a tool with which Banks do their business as defined by the Banking regulation act 1949.

In the past these IT Companies have hoisted under performing software on the industry which is one of the root causes for the information risk inherent in the industry today. These IT companies sell software which is convenient to them and not what is safe for the customers. This is the reason why the “Eurograbber” or “Zeus” type of trojans can make merry in the system.

Unless the Bank owners demand a “Secure Banking Software” as a pre-condition these IT Companies will continue to make money at the expense of Bank customers.

Even the Banks need to ensure that they have enough internal expertise in “Core Banking” with which they can evaluate the functional aspects of a software and identify the security loopholes. Unfortunately many of the new generation Banks think banking to be a “Customer Acquisition Marketing program” and engage professionals who are good in marketing but have little knowledge of the domain. They consider each customer as a “Profit Center” and try to maximize the profit per customer. In the process, if the customer collapses, they donot mind and move onto the next customer.

We need “Customer Centric Bankers” who keep the interest of long term customer relationship as the key principle of banking and convert it into software specifications. The present situation where Banks are reluctant to use Digital Signatures for banking authentication and ignore the need to use “Real time risk management software” are indications of the fact that most Bankers are not able to understand the Banking risks and how it translates into information risk in a technology banking area.

Though there has been an improvement of information security practices in some Banks in the last 6 months, many Banks are far below the expected level of security.

The new Banking license aspirants should therefore avoid falling a prey to the IT Companies by accepting their proposals on the dotted line and demand that the software vendors assume the responsibility for frauds arising out of technology issues.

Customers are indifferent as to whether the technology vendors bears the risk of technology frauds or the Bankers but are keen that RBI makes Cyber Crime Insurance mandatory for the new Banks as a part of the licensing regime.

Older Banks may be happy with the proposal since it will create an additional barrier to the new Banks. It is left to the RBI to decide if Cyber Crime Insurance should be made mandatory even for the existing Banks. But even if Cyber Crime insurance is not mandatory for existing Banks and becomes mandatory only for the new generation Banks, it could become a factor of differentiation with which new Banks may promote their deposit products.

Whether the Banks are happy or not, if RBI makes Cyber Crime Insurance mandatory for new Banks, it would make the customers of the new Banks happy.

This should also add to the viability of the new Banks amidst the pressures of Financial Inclusion and Priority Sector lending. Since the technology platform of these Banks is being created afresh, it is possible for the Cyber Crime Insurance industry to work in close alliance with the technology vendors, Information Security professionals and the user Banks and ensure that the systems are tweaked to improve the security levels to levels higher than at present.

We can therefore look for more interesting and exciting times ahead for the Banking industry in India.

Naavi

Related Article:

Indian IT companies chase banking licence hopefuls

Earlier articles on New Banking License

New Banking Licenses in India

Posted by Vijayashankar Na on July 7, 2013
Posted in BankRBI  | Tagged With: , , , , , , , | No Comments yet, please leave one

The recent decision of RBI to  invite fresh applications for new Banking licenses have evoked response from 26 applicants. The undersigned who joined the Banking industry in 1973 and has been in working in the industry upto 1987 and later around the industry in Marketing of Banking services since 2000, diversified  as a consultant in Information Security for Banks particularly working for “Safe E Banking” environment.

With this background, some of my thoughts on the new licencing aspects have been placed on this website.

Here is a summary of articles so far placed on the website.

1. Should Indian Post be granted Banking license?… Do they need one?

2.Which of the 26 applicants deserve Bank license

3.Banking License aspirants should disclose business plans to public.

4.Will RBI disclose “Santion Mechanism” to enforce sanctity of Banking license conditions?

5. Not all Eligible applicants to get Banking license

6. New Bank Licenses-Make Cyber Crime Insurance Mandatory

7. “Deep Pockets” need not be the sole criteria for Bank licenses

8.Banking Licenses and Public Sector aspirants

9. New Banking License-Let’s remember Gandhian Principles of Banking

Naavi