For cryptocurrencies, 2018 has been a virtual nightmare with Bitcoin, bungee-dropping 80% from its peak of $19,000 attained in Dec 2018. This years fall was an upside-down image of its upward climb the whole of last year, highlighting the volatility. Warren Buffett, calls it ‘rat poison squared’, and for Nouriel Roubini,  it is nothing but a mother of all scams

Bit Coin in India

If you follow the current legal news, it’s hard to avoid the debate surrounding bitcoin. The virtual currency is a complex concept to most – an intangible global payment network that’s transmitted electronically. The government of India has fixed May 31, 2017, as the last day by which citizens can express their views of digital currencies on the government portal mygov.in

However, unlike other global payment networks, bitcoin is autonomous, having no corporate ownership and instead relying on a self-regulated, international peer-to-peer network to conduct direct transactions. Bitcoin isn’t pegged to an underlying currency such as the dollar or euro and the network operates in units of bitcoin.

Transactions are recorded in a public database called the blockchain, but users can buy and sell anonymously, using different currencies. As of May 2017, one bitcoin is equal to roughly Rs 1.42 lakh.

While bitcoin is a long way away from becoming the currency of choice in India, technology enthusiasts have used it for everything from investment to online trading and basic uses such as shopping.

What are the laws around bitcoin in India?

India currently has no regulations around bitcoin. As it’s unregulated and difficult for most people to grasp immediately, it’s not considered legal currency in India, as it is in Japan.

The Reserve Bank of India (RBI) has cautioned people against using virtual currencies, warning that there are too many legal, financial and security risks, especially around consumer protection. While bitcoin is not illegal in India, the fact that it operates in a grey area means there is not much legal recourse for victims of fraud.

Because bitcoin users remain anonymous, authorities fear the so-called crypto-currency is a mask for criminals and anti-social elements. Computer hackers have been known to demand payment in bitcoin because transactions are so hard to track down.

However, Indian bitcoin exchanges, such as Unocoin, BuyUCoin, Coinsecure and Zebpay and require completion of know your customer (KYC) formalities, removing some of the anonymity and therefore the whole appeal for many people. Some of these exchanges also operate as digital wallets.

Taking cognizance of the growing interest in bitcoin, the government recently established a committee to study the feasibility of introducing a legal framework that governs virtual currencies in India. The committee comprises experts from the Ministry of Finance, RBI, Niti Aayog, State Bank of India and other departments.

Since the government’s move to ban high currency notes last year, there has been an even greater push toward cashless transactions and digital payments. Immediately after the shock announcement on November 8, the price of bitcoin on Indian exchanges shot up.

Domestic bitcoin exchanges have reported several lakhs in downloads and thousands of new signups every day over the last few months. Proponents of digital currency also believe it can help millions of unbanked Indians enter the formal economy by making their participation virtual and eliminating middlemen and institutions.

In times of financial instability, bitcoin has surged globally. This is one of the reasons some refer to it as “digital gold.” But, like, any other currency or commodity, it’s also subject to downward adjustments.

In addition to Japan, Russia and Australia are moving closer to regulating bitcoin. Australia will begin accepting it as legal currency in July 2017.

The government committee on bitcoin has three months to put together its report. Even after its release, the government may require more convincing before Bitcoin comes anywhere near the status of fiat currency.

For more of legal & business news, visit BloombergQuint.

The government of India has fixed May 31, 2017, as the last day by which citizens can express their views of digital currencies on the government portal mygov.in.

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