Bitcoin was one of biggest buzzwords of 2017, in India and in the world. Google’s ‘Year in Search’ report for 2017 showed ‘How to buy Bitcoin in India’ and ‘What is Bitcoin’ were among the year’s top queries. The interest was fuelled by a spectacular rally that saw Bitcoin rise from under $1,000 at the beginning of 2017 to an all-time of high $19,500 (approx. Rs. 12.5 lakh) in mid-December.
The Bitcoin boom in India has not gone unnoticed by the country’s regulatory agencies, which are now cracking down on the crypto-currency. But what is the legal status of Bitcoin in India? Bitcoin’s roaring success towards the end of 2017 proved irresistible to Indian investors, despite rumours that the Government could put a stop to the crypto-currencies in the country.
At the moment Bitcoin has not been banned or outlawed, but India’s finance institutions do not recognise it as legal tender. India’s complicated relationship with Bitcoin is all the more bizarre because neither the Government nor the Reserve Bank of India have officially clamped down on it, but have approached it with a palpable degree of hostility and great caution.
“A committee under the chairmanship of Secretary, Department of Economic Affairs, is deliberating over all issues related to crypto-currencies…The Government does not consider crypto-currencies to be legal tender”.
Arun Jaitley Union Finance Minister
All the while individual Bitcoin traders and exchanges appear to be bearing the brunt of a campaign that has already begun to impact crypto usage across the country as banks are choking Bitcoin by blocking deposits and withdrawals.
DMK MP Kanimozhi wanted to know in the Rajya Sabha during the Winter Session of Parliament whether the “Government is considering to regulate crypto-currencies such as Bitcoin and Ethereum, as India accounts for more than 11 per cent of global crypto-currency trade”. Finance Minister Arun Jaitley replied that “a committee under the chairmanship of Secretary, Department of Economic Affairs, is deliberating over all issues related to crypto-currencies to propose specific actions to be taken”, and that “the Government does not consider crypto-currencies to be legal tender”.
The Ministry of Finance issued an official statement on December 29 in which it labelled Bitcoin a worthless “Ponzi scheme”.
Despite the crackdowns against this crypto-currency, Bitcoin trade has been surging in India. Industry sources estimate that there are eight million Indians who trade in this digital currency, which works without a central bank or single administrator.
“If is it illegal, the Government has all the authority to ban this trade. But why isn’t it doing so?” asks Subharansh Rai, co-founder and COO of EthxPay, a Delhi-based Bitcoin exchange.
The reason, say experts, could be that the Government may look at Bitcoin as a taxable commodity in the future.
Given the risk and the volatility involved in Bitcoin trade, it is quite likely that Bitcoins will remain under the Government scanner for some time to come.
Despite threat of Government regulation, India’s crypto community is hell-bent on keeping the movement alive in an attempt to put India on the map of leading fin-tech nations.
Realty & More interviewed EthxPay COO Subharansh Rai to understand the present scenario:
Realty &More: The Government has stepped up hostility towards this business lately, how do you perceive it?
Subharansh Rai: We welcome all kind of government surveys including the Income Tax surveys which were carried out recently for Bitcoin exchanges. It is good for us but the Government should start recognising this business.
R&M: But the Government’s position is clear, it doesn’t recognise it as legal currency?
SR: If it is illegal, the Government has all the authority to ban this trade. But why isn’t it doing so? We will do our best to continue with our efforts to educate the Government about crypto-currencies. It can be useful for India by turning the country into a fin-tech hub, to increase financial inclusion, and there are several other benefits of it.
“If is it illegal, the Government has all the authority to ban this trade. But why isn’t it doing so… Far from the doom and gloom of the bubble bursting, I see the potential in Bitcoin to become a success story.”
Subharansh Rai Co-founder and COO, EthxPay
R&M: How do you describe it as valid transaction without going through a banking system? It is very difficult to keep track on transactions?
SR: All transactions are taking place in the knowledge of banks as investors can open an account on Bitcoin exchanges after submitting key identification details such as Aadhar and PAN card, and use their bank accounts to buy Bitcoins or open personal wallet. Transactions are made from this wallet to other digital wallets using a private key.
R&M: How do you describe volatility of this business?
SR: Just like gold, Bitcoin’s value is based on the collective perception of its value. Gold is just shiny metal, but it’s considered rare, a limited commodity by the masses. Bitcoin is a limited commodity also, in high demand, and like gold during the Gold Rush, pricing is volatile. If you want to cash in on Bitcoin, buy GBTC (the Bitcoin Investment Trust), it’s valued based on its Bitcoin holdings, easily bought and easily sold. No muss, no fuss, just huge profits.
R&M: The Bitcoin is an extremely vulnerable instrument because it has no intrinsic value, as experts say – people are going to be shocked when they try to liquify their Bitcoins.
SR: Far from the doom and gloom of the bubble bursting, I see the potential in Bitcoin to become a success story. The appetite for Bitcoin is not waning anytime soon and I don’t see a financial crash looming on the horizon. The demand for the asset remains highly elevated and the fact that you can now trade it on an exchanges means it’s open to a wider audience. The only caution to investor, I urge people not to further fuel the Bitcoin bubble and tempt fate by buying into it.