The trading of the popular crypto currency, Bitcoin, started in 2010 with the earliest Bitcoin exchange listing its value at USD 0.003. By early 2011, each Bitcoin came to cost about USD 1 (approximately INR 44.50 at the time). Today, some 6 years later, the cost of Bitcoin has crossed the USD 10,000 mark for the first time. This means that had you invested approximately INR 4450 into Bitcoins in 2011, today you could have encashed them for approximately INR 7 crore. Stupendous, isn’t it? But that has been the frightening yet phenomenal journey of this enigmatic currency called Bitcoin.
What is Bitcoin?
Bitcoin is the most popular and most commonly used crypto currency or virtual currency. It was created in 2009 by an unknown entity and has been used across the globe as a digital payment system. Like all crypto currencies it is not regulated by any administrative system and is traded in virtual Bitcoin exchanges. There are currently about USD 167 billion worth Bitcoins in use across the world – making up about two thirds of all the crypto currencies available (by value). Estimates suggest that there are over 2,500 Indians engaged in Bitcoin mining and trading on a daily basis.
The greatest risk involved in the exchange and trade of Bitcoin and all such crypto currencies is the lack of regulation. Though the use of these is not explicitly banned in the country, the central bank, the Reserve Bank of India (RBI), does not authorise any payments using Bitcoin. Unlike the Indian Rupee which is regulated by the RBI there is no approval or currency control by any monetary authority in the country for the use of Bitcoin. The RBI had, in fact, cautioned virtual currency (VC) users thus – “The creation, trading or usage of VCs including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities”.
In all about USD 300 billion worth of VC are now in use across the world. The ordinary trader looks at the hugely popular digital currency and its lack of regulation as a means of quick earning but it must be stressed here that economists continue to warn us that the Bitcoin bubble is all set to burst. If it does the risks of incurring a huge loss is also very high.
Other digital currencies
There are numerous digital currencies that are being used and traded across the world. In fact some reports suggest that there may be as many as 900 such virtual currencies. Apart from Bitcoin, the following are the most popular virtual currencies in use in India –
- Darkcoin (DASH)
Each of these digital currencies can be bought and traded in India and each of them has features similar to those of the Bitcoin. The value of these crypto currencies has increased considerable since last year.
Future of Bitcoin
Any discussion related to the future of Bitcoin in India is certainly a journey into the realm of conjecture. The only thing we may say with any bit of certainty is the fact that we live in times where the government of India and the central bank must acknowledge the existence of digital or virtual currencies and come up with a regulatory mechanism for their trade and transactions. As of now India’s fiscal health is sound and there is no undue reliance on such digital currencies but with an increases emphasis on digital payments this is something that our lawmakers and regulatory authorities cannot afford to ignore.
Our own crypto currency in store?
While the RBI is nowhere close to giving the Bitcoin its sanction, recent news reports suggest that India’s central bank may be close to launching its own digital currency. While we still do not have any reliable information about the central bank’s research, unofficial sources say that the RBI may be looking into the possibility of launching Lakshmi, India’s own indigenous Bitcoin-like crypto currency. If it does, the RBI will certainly not be the first central bank in Asia to explore the possibility of such a launch. The People’s Bank of China, the European Central Bank, and the Bank of Japan are all at various stages of testing their own digital currencies. The De Nederlandsche Bank, the Dutch Central Bank, has its own digital currency that is currently in use.