Is there any future for Bitcoin in India?
A Bitcoin which last year valued nearly Rs 12 lakh in India, has now more than halved to near Rs 4.45 lakh.
Bitcoin struck the world like a flu, but in a very short span of time the coin witnessed the moments of limelight as well as downfall. The craze for this currency was such that if an investor could not afford to have it, they did not shy away from trading in other cryptocurrencies. Global banks and many other regulatory authorities across the nation, however, are indicating that Bitcoin has entered bubble phase, but this is not something new as it has already witnessed the soap bubble phase, and that could not stop the coin from making headlines.
Nevertheless, the coin is not hated among all, as there are many countries who have started encouraging trading in Bitcoin, but India is not one of them. Both Indian government and its apex bank have refrained from giving Bitcoin a legal status.
One Bitcoin which last year valued nearly Rs 12 lakh in India, has now more than halved to near Rs 4.45 lakh.
While banning exchanges dealing with virtual currencies, the Reserve Bank of India (RBI) on April 5 revealed that they are exploring a 'fiat digital currency'.
This can be a good start for India, but how will RBI plan to regulate ‘fiat digital currency’ would be keenly watched.
The industry chamber, Assocham, encouraged RBI’s move, but the cautioned that extreme care be taken to ensure safety of the data trail that the cryptocurrency can leave as it changes hands through a range of electronic devices and platforms.
A Fiat digital currency is something which a government declares to be legal tender, but it’s not backed by physical commodity. Trading under this currency is carried from relationship between demand and supply which is not derived from the value of money is made of. Most currencies are physically based commodities like gold and silver, but fiat money is solely dependent on the faith and credit of the economy.
It needs to be noted that fiat digital currency and virtual currency have similar operations. The only difference is that they are unregulated and are usually controlled by their developers and accepted among the members of a specific virtual currency.
It’s quite evident why RBI is still not comfortable with Bitcoin and other cryptocurrencies. The central bank is so much against the virtual currency that recently it licenced three exchanges for launching Blockchain network - where no trading in Bitcoin was carried.
The question can be asked if Bitcoin would can be valued as a currency in India, or will there be any future for this coin?.
The fact is that the RBI has neither declared Bitcoin as illegal in India, nor it has accepted the coin as a currency. So far, the apex bank has just highlighted the risk this virtual currency came with, and how investors should be cautioned while trading in them.
As per section 2(h) of Foreign Exchange Management Act, 1999 notified by RBI, “Currency” includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travellers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments.
Bitcoin doesn’t fit in any of the illustrative names, however, a Vinod Kothari Consultants research report earlier stated that if RBI wants, it can certainly notify it to be included in the above definition.
If Bitcoin cannot be a currency, then can it be one of the coins.?
As per section 2(a) of Coinage Act, 2011, the word coin is referred as any coin in the form of meal or any other material stamped by government or any other authority empowered by the government in this behalf.
From the above definition, it means ‘coin’ does not include the credit card, debit card, postal order and e-money issued by any bank, post office or financial institution.
Therefore, Bitcoin is certainly not metal or even any other material for that matter.
Further, a currency is classified into centralized and decentralized. Those which are governed by central repository or a designated entity for sake of trust over transactions taking place are termed as centralized currency. But bitcoin doesn’t work like that.
Transactions in bitcoin take place on a decentralized P2P system, where all entities operate independently, and hold the entire risk of dealing in the same.
Then comes into picture FEMA’s framework in section 2(m), where talks about ‘foreign currency’ means any currency other than Indian one.
According to the research report, RBI can explicitly declare bitcoins to be currency, but in this case, it would fall under the definition of foreign currency and be dealt with accordingly.
However, current situation is such that, Bitcoin does not fall in any of the above definitions, thus, it is not included in foreign currency category either, as per FEMA. Therefore, RBI would have to explicitly notify it to be such in the first place.
So is there any future of Bitcoin?
A crypto exchange, PocketBits, on RBI’s move tweeted, “As things stand this is nothing new, most of the Indian crypto exchanges do have banking as most banks have already withdrawn from crypto-related transactions since months.”
— WhalePanda (@WhalePanda) April 5, 2018
“We cannot comment on the times ahead but there is no need to panic, RBI has just reiterated what they have already implemented, there is no ban on Bitcoin in India as of yet, there is no official stand of the government on this. This is just central bank taking a stand against a technology which they were going to implement themselves in terms of a digital rupee,” it further stated.
“This is just a speedbreaker to stifle innovation, there is no BAN on crypto in India,” PocketBits said.
Bitcoin has already witnessed a Bubble phase in the year 2013. The price of one Bitcoin was at $1,147.25 on December 4, 2013, which came down more than half to $522 within 15 days on December 18, 2013.
There are about 1,548 cryptocurrencies currently open for trading, with Bitcoin dominating the market. Bitcoin is available for trading since 2009, and due to the last year’s blockbuster performance, it managed to give return 18,329.91% or 184.30 times return.
Bitcoin is currently trading at $6,854.89, up by 1.53% with market cap of $116.35 billion, as per CoinMarketCap.