This article is written by Sarabdeep, co-founder of Sipacoin.com. He also co-founded Bodhik.com and before that was Head of Digital Marketing and CRM for eBay India. He writes on Personal Finance, Cryptocurrencies and is published on top blogs and publications in India.
Bitcoin as a legal Currency. Will it ever be a reality?
In 2008 when Satoshi Nakamoto published his paper on bitcoin and announced the arrival of a new digital cryptocurrency no one would have imagined in less than 10 years, the revolution would catch the imagination of the world as no one before. In last few years bitcoin has not just grown in value (valued at more than 100 billion dollars now). But has also sent shock waves across various governments as they scurry to understand and react how will it potentially impact government monopoly over money movement.
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Typically there have been 3 kinds of responses from Government.
Go ahead and explicitly ban Bitcoin.
- Few governments like Bangladesh, Bolivia, Ecuador, and Kyrgyzstan, have gone ahead and in a knee-jerk reaction of sorts declared bitcoin illegal.
Be Ambivalent and say Bitcoin is not regulated but stop short of making it legal.
- Majority of the governments fall into this category. They have not banned bitcoin but essentially take a position which varies from we do not regulate Bitcoin to we do not care or we do not recognize bitcoins for payments and transactions or as a currency.
- Some of the big countries that have an ambivalent stand includes Russia, India, and China.
- Russian central bank declared in 2017 that they are against declaring regulating cryptocurrencies as money and as such they cannot be used for paying goods and services.
- China led a big crackdown on bitcoin exchanges in February of 2017. China still does not have any clear regulatory stand but 3rd Party payment processors are not allowed to process bitcoin payments.
- Indian central bank RBI has also recently announced Bitcoins is not acceptable as a payment or settlement mechanism.
Countries which embraced Bitcoins and are working with community to build regulations
- Many countries have taken a forward-looking policy approach to bitcoin and are working towards working with Bitcoin foundation and other Cryptocurrency founders to design regulations.
- In 2017 Japanese government has recognized Bitcoin as the payment method.
- In United States Bitcoin has been recognized as a convertible decentralized virtual currency in 2013. Some of the US states have gone further ahead. New York state has come up with Bitlicense which is first virtual currency specific licensing regime.
- Similarly, Canada has defined taxation norms for bitcoin. Canada is planning to regulate dealers in digital currency as money service businesses.
- In Switzerland Bitcoin is subject to Anti Money Laundering regulations and in some instance may need to obtain a banking license. Zug which is a city in Switzerland has adopted Bitcoin as a payment method for paying city fees since 2016. Also, Switzerland railways sell bitcoins at its ticket machines.
What is the legal status of Bitcoin in India
As of today, Bitcoin is not illegal in India but that does not automatically mean everything related to bitcoin is legal. In its latest message RBI Executive Director categorically stated that Bitcoin cannot be used for payment and settlement mechanism. RBI has consistently maintained an antagonistic stand towards bitcoins and it continues.
In fact, there has been chatter in some quarters that India may launch its own cryptocurrency. This is eerily similar to what policymakers are trying to do in Russia and China.
Having said that it does not mean Bitcoins have been declared illegal in India, it just means they cannot be used for payments and settlement. There are multiple exchanges that have propped up where you can buy and sell bitcoins or other Cryptocurrencies in India. Some of the notable include.
Apart from that, there are multiple global exchanges which are open to Indian users.
How should India Look at Bitcoins and wider Crypto ecosystem
Bitcoins and Cryptocurrency in general as a technology and concept have arrived and are here to stay. While Bitcoin might not be the ultimate winner in this new Cryptoecosytem being developed there is no doubt in my mind they are the future. In this regard, all banking and payment regulators across the world and India should desist shunning Cryptocurrencies as it will be counterproductive.
In fact here are my key suggestions to regulators in India on how to think about regulations on Bitcoin and cryptocurrencies in general.
Engage with communities
Many of the cryptocurrencies around the world are being developed by a community of developers or entrepreneurs. Indian Regulators and RBI should start engaging with them. The core technology behind Cryptocurrencies are revolutionary and engaging with folks at the forefront of building this will only help us understand better which in turn can help more sensible regulations.
Don’t stop if you cannot promote
Sometimes it is best for regulators to stay away and let market forces evolve on their own while this is not the best solution but knee-jerk bans can be catastrophic.
Take a lead it can be a differentiator
Ideally, we should be at forefront of enabling Crypto businesses this can attract a lot of talent and investments and place us a leader in some of the emerging technologies like blockchain. We have already missed the product wave and IT services are losing its steam it is absolutely essential that we do not miss the Crypto wave and one way to do it is be forward-looking in regulations providing an enabling environment for Crypto companies to grow and flourish.
Will Bitcoin bring a new revolution? Well, no one knows for sure, But one thing is sure, Decentralized, anonymous and more secure systems are here to stay and there is no one stopping them. It is imperative for our existing centralized Institutions and bureaucracy to start understanding and interacting with architects of this new order. We need forward looking regulations and framework it might be just the leap we are looking to bring about new growth avenues to India.