Bitcoin and Its Prospects in India

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INTRODUCTION

Bitcoin is the first worldwide, decentralized money that enables transfer of money from one individual to another without including a third party, for example, a bank. A computer system is needed to make exchanges as Bitcoin is basically a software. AsBitcoin is a decentralized money so it is not controlled by anybody. It's open so anybody can make use of it.
Lack of control could mean chaos, but that’s not true at all. That’s because ofBlockchain, the technology behind Bitcoin is one of the most accurate and secure systems ever created.

Bitcoin is a Crypto-Currencywhich means:

 It is a digital asset and no physical object in the world can be referred to as'OneBitcoin'or any amount in its smaller
units (Satoshis:: 1 Bitcoin= 10^8 Satoshis)

 It uses Encryption Techniques for validating transactions and even for its self-generation. SHA-256 in the case of Bitcoin.

It is a peer to peer, decentralised electronic cash system and does not rely on any centralised authority such as a Bank or VISA or any other organisation.

Bitcoin in India

The Bitcoin craze is catching on in India. While tech geeks and young investors eye the digital cryptocurrency as its value soars, the government, too, is contemplating a course of action surrounding its regulation (S Bhattacharjee and H Kaur, 2015).In a move expected to boost financial inclusion, the Department of Economic Affairs in the Ministry of Finance in India has formed an inter-disciplinary committee to examine the framework on virtual currencies. In addition, the government initiated a discussion on its forum MyGov to seek public opinion on virtual currencies. Clearly, despite some initial reservations, the Indian government is keen on understanding how Bitcoin works and is willing to deploy resources to build frameworks.Bitcoin investors and companies welcome these efforts. They feel it will allow them to address concerns over security and risks pertaining to the use of Bitcoin, and eventually work towards improving its infrastructure.

How to buy Bitcoins?

There are various digital currency exchanges to buy bitcoin. It can be purchased 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. Bitcoinscan also be purchased by making a payment to Zebpay's bank account. One can also withdraw the money to his bank account, and track data on Bitcoin valuation in the country. There is a KYC requirement and ID need to be verified by simply clicking a photo on the PAN card. Unocoin, another India-based exchange also offers trade Bitcoins. It assist in buying, selling, storing, using and accepting Bitcoin.The company claims it has over 1,50,000 tomers.
Indian government’s initiative to make India a less cash economy, digital cryptocurrency has caught the attention of many Indians.Post demonetisation, leading Bitcoin exchanges in India witnessed a rise in user base by up to 250 per cent.Indians are enquiring about bitcoins as an alternative and safe investment option. They are downloading Zebpay as they want to experiment with digital currencies. There has been a 50% increase in Zebpay downloads.

Recognizing concerns

The majority of Indians expressed interests in seeing Bitcoin become a larger part of the financial and trading systems in India. But still there is apprehensiveness about its reliability as a currency. There have been reports of bitcoin trading amounting to money-laundering and that it propagates the financing of terrorist outfits.Bitcoin is also viewed with suspicion because it doesn’t fall under the purview of any government- mandated monetary policy, and fluctuates in value. Earlier this year, India’s central banking institution Reserve Bank of India issued a note of caution to users and traders of virtual currencies about the risks of using Bitcoin.Still, Indian Bitcoin companies are observing an increase in customers. After Prime Minister Narendra Modi’s demonetization move last November, numbers surged and it believed there are nearly 600,000 Bitcoin users in India, according to the founders of several bitcoin outfits. Companies also attribute growing interest to the increase in internet penetration, the success of Bitcoin overseas and the allure of the
returns on unconventional investments.

A promising future

The Bitcoin craze is catching up in India. While tech geeks and young investors eye the digital cryptocurrency as its value soars, the government, too, is contemplating a course of action surrounding its regulation (A K Gupta,2017).In a move expected to boost financial inclusion, the Department of Economic Affairs in the Ministry of Finance in India has formed an inter-disciplinary committee to examine the framework on virtual currencies. In addition, the government initiated a discussion on its forum My Gov to seek public opinion on virtual currencies. Clearly, despite some initial reservations, the Indian government is keen on understanding how Bitcoin works and is willing to deploy resources to build frameworks.Bitcoin investors and companies welcome these efforts. They feel will it allow them to address concerns over security and risks pertaining to the use of Bitcoin, and eventually work towards improving its infrastructure.
Seeing the growing number of Bitcoins investor in the country its future in India looks promising. Service providers are keen to expand the scope of usage, with the hope that the government and regulatory authorities provides them adequate frameworks. Currently, Bitcoins are used to make purchases through mobile apps and buy gift vouchers. In the future, companies plan to step up the infrastructure that would support remittances to India and provide online
financial solutions for the country's unbaked population. The Reserve Bank of India, which oversees the foreign exchange market, has issued a notice acknowledging that virtual currencies such as Bitcoin posed legal, regulatory and operational challenges. This outlook of the RBI is expected to continue until Bitcoin is regulated by the Government. In December 2013, the RBI clarified that it had no immediate plans to regulate Bitcoin.
Indian government has not declared Bitcoins illegal. However, this does not necessarily mean that Bitcoins are legal in India. By its nature, Bitcoin may be considered to be a non-Indian currency. The buying and selling of foreign currency is regulated by the Foreign Exchange Management Act (FEMA). This Act does not recogniseBitcoin. Owing to this certainty, the use of Bitcoin is vulnerable to legal risks in India.The Reserve Bank of India, which oversees the foreign exchange market, has issued a notice acknowledging that virtual currencies such as Bitcoin posed legal, regulatory and operational challenges. This outlook of the RBI is expected to continue until Bitcoin is regulated by the Government. In December 2013, the RBI clarified that it had no immediate plans to regulate Bitcoin.On February 1, 2017 the RBI again reiterated cautionary message to potential users of bitcoins and other virtual currencies that it (the RBI) does not regulate and has not licensed any virtual currencies in India.12 On March 1, 2017 RBI Deputy Governor R. Gandhi voiced
concerns over financial, legal and security-related risks associated with the use of virtual currencies. 13 It is estimated that as on August 2016, the number of Bitcoin users in India stood at 50,000 and growing. New Bitcoin exchanges have cropped up in India such as BTCXIndia, Coinsecure, Unocoin and Zebpay and this can be seen as an assertion of growing popularity of Bitcoin in India.

CONCLUSION

To sum up the discussion, it can be said that while Bitcoins may not replace the “Fiat Currency” anytime soon in near future, but there has been a remarkable growth in the acceptance of cryptocurrencies. The lack of regulatory structure and oversight is causing uncertainties and perplexities for both: the users and law enforcement agencies.The Income Tax department in India is in the midst of serious contemplation over how to impose tax on Bitcoin miners in India in the long run. However, until RBI comes out with clear guidelines, Bitcoin regulatory mechanism will not be fully aligned with the overall goal of regulating its exchange, transfer and trading and protection of individual’s interests. Indian investors are still hesitant to invest in Bitcoins, given the high risks associated with it, but still the demand for Bitcoins has grown manifold. Although virtual currencies will be safer and better over time, and eventually become a form of transaction
but it can be said that a good legal and regulatory framework for Bitcoins would help the investors decide the viability of Bitcoins in the long run.