Bitcoin as most common Virtual Currency
Bitcoin is a decentralized payment framework that depends on proof of work. Initially presented in 2009, it is rising digital currency. Bitcoin is as of now coordinated over a few organizations and has a few trade markets. A few organizations are beginning to acknowledge Bitcoin exchanges. It is likewise anticipated that Bitcoin ATMs will be conveyed in an area around the world with a specific end goal to cross over any barrier between digital currency and money.
The recent weeks have been difficult for the cryptocurrency world, with governments in China and Russia instating bans and restrictions on Bitcoin utilization. In South Korea, one of the significant markets of Bitcoins, neighborhood police made a few captures, attributable to the illegal responsibility for. Recently, Jamie Dimon, Chief of JP Morgan Pursue, stood out as truly newsworthy for naming Bitcoin as a “fraud” that will inevitably “blow up”. BTC China (BTCC), world’s second biggest cryptocurrency exchange announced the closure of its China operations.
Development of Position with regard to Virtual Currencies (such as Bitcoin in India)
Potential financial, operational, legal, customer protection and security related risks are associated to deal with Bitcoin or any virtual currency in India. Any user, holder, investor, trader, etc. dealing with Virtual Currencies are prone to such risks.
The Reserve Bank Of India (RBI) – Central Bank, has not issued any licenses to work with cryptocurrencies in the nation. Reserve Bank is presently examining the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory framework of the country.
RBI cautioned the users of all virtual currencies (VCs) of following risks in December 2013 –
- VCs being in digital form are stored in digital/electronic media that are called electronic wallets. Therefore, they are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack etc. Since they are not created by or traded through any authorized central registry or agency, the loss of the e-wallet could result in the permanent loss of the VCs held in them.
- Payments by VCs, such as Bitcoins, take place on a peer-to-peer basis without an authorized central agency which regulates such payments. As such, there is no established framework for recourse to customer problems/disputes/charge backs etc.
- There is no underlying or backing of any asset for VCs. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value.
- It is reported that VCs, such as Bitcoins, are being traded on exchange platforms set up in various jurisdictions whose legal status is also unclear. Hence, the traders of VCs on such platforms are exposed to legal as well as financial risks.
- There have been several media reports of the usage of VCs, including Bitcoins, for illicit and illegal activities in several jurisdictions. The absence of information of counterparties in such peer-to-peer anonymous/pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.
Vide press release dated February 1, 2017, RBI has again clarified that it has not given any license/ authorization to any entity/company to operate such schemes or deal with Bitcoin or any VC. The Indian Supreme Court recently pushed the government to react to calls to control Bitcoin.
Role of Private Bitcoin organizations
India’s Bitcoin Organizations are working to demonstrate their stage are dependable. They are re-executing various security checks and all Bitcoin organizations look for substantial ID proofs from the clients –
- Government-verified address records,
- An Aadhar number, or
- A Perpetual Record Number (Container).
Private Bitcoin organizations have likewise framed their own particular affiliation – the Digital Resources and Blockchain Establishment India (DABFI). The self-managed element is working towards instructing the majority of cryptocurrencies.
The worries over the ransomware attacks that have happened universally, the Indian government is as yet sitting wavering with respect to the legal status of the cryptocurrencies.
As of now, Bitcoin is utilized to make buys through versatile applications and purchase blessings vouchers. Later on, organizations intend to advance up the infrastructure that would support settlements to India and give online monetary answers for the nation’s unbanked populace.
This post has been contributed by Venkatesh Agarwal, a 2nd year law student at UPES University.
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