As bitcoins touch record levels, a government panel has advised closing cryptocurrency dealers in India.
The panel made the suggestion to curb the use of cryptocurrencies in the country, ETNow reported on Thursday quoting agencies.
The report surfaces at a time when Bitcoin’s price has zoomed past $7,000 after the Chicago Mercantile Exchange (CME) Group Inc’s announcement on Tuesday that it plans to introduce bitcoin futures by the end of the year, after regulatory approval. Following the announcement, Coinbase Inc added more than 100,000 users in 24 hours.
In July, Business Standard had reported that the government is considering setting up a regulatory structure to oversee trading of bitcoin.
On Thursday, cryptocurrency traded at a record high of $6,938.
According to market experts, banning cryptocurrency dealers or exchanges would not work as trading of virtual currencies has increased globally and have given extraordinary returns. However, adoption of bitcoin can also pose various problems for the government as it will tend to loose its control over the financial system.
At present, bitcoin is hovering around Rs 4.90 lakh mark in India against Rs 1.79 lakh where it had three months back on August 2, 2017.
Instead of closing cryptocurrency dealers, the government should take steps to curb buying and selling of bitcoins or cryptocurrencies in cash, Hesham Rehman, CEO & Co-founder, Bitxoxo, a bitcoin exchange operating in India told ET.
Meanwhile, Credit Suisse Group AG Chief Executive Officer Tidjane Thiam asserted that bitcoin is the “very definition of a bubble”. “Most banks in the current state of regulation have little or no appetite to get involved in a currency which has such anti-money laundering challenges,” Thiam said.
“From what we can identify, the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble,” he added.
What is bitcoin?
As a Business Standard editorial mentioned, Bitcoin is a digital currency, described as a peer-to-peer version of electronic cash, which would allow online payments to be sent directly from one party to another without going through a financial intermediary. It was invented eight years back, but awareness at the mass level is a matter of only the last few years.
How are bitcoins transferred?
1. Bitcoin transfers take place by means of a computer-generated string of “0″s and “1″s (a computer does not “read” anything else in any case), which transfer bitcoins from one wallet (or account) to another, the accounts being maintained on a giant electronic ledger.
2. The wallets are anonymous. Each string of numbers can be used only once . The anonymous holder of the wallet can be anywhere in the world, thus making bitcoin a truly global, if electronic, currency: Transaction costs are negligible to zero.
Steps to trade in bitcoins
1. Install a bitcoin “wallet” on a computer or mobile phone.
2. The wallet will generate an “address” on which bitcoins can be paid in or paid out (the latter only if you have adequate balance in your wallet).
3. All transactions are included in a “blockchain” whose integrity and chronological order are protected by cryptography. The blockchain is the technology that is used for operating these digital currencies and is treated as a commodity in countries where they are recognised.
4. The wallet can be stocked by purchasing bitcoins on an “exchange” for real money.
What are the risks of cryptocurrencies?
1. Cryptocurrencies typically operate in a volatile market.
2. At present, there is no regulatory framework or governing body to manage them.
3. Bitcoin is the preferred currency for many hackers and the recent series of ransomware attacks across the world has also caused panic. One can also face difficulty in recovering the cryptocurrency if the digital wallet is hacked.
4. The technology underpinning bitcoin (blockchain) is about to be overhauled drastically and this may cause a split in the currency.
India to have its own cryptocurrency?
Last month, Business Standard noted that the government is considering the possibility of introducing its own cryptocurrency, code-named “Lakshmi”. If it is introduced, “Lakshmi” would run on some variation of the blockchain technology employed by bitcoin that verifies every trade and rules out dual transactions employing the same coin. However, the Reserve Bank of India (RBI) would have to solve several tricky questions before introducing “Lakshmi”.