Bitcoin based trade is booming around the globe, but there are complexities in regulating cryptocurrencies.
Effective regulation of cryptocurrency trade will require coordinated action by multiple agencies.
What are bitcoins?
Bitcoins are cryptocurrencies which are most commonly used across the globe, they do not have geographical borders or limitations.
i.e. USD is a currency and it belongs to USA, but bitcoin is a crypto currency which does not belong to any nation, so that there is no regulatory authority for bitcoins.
Bitcoin transactions done globally can be completed in a few seconds with minimal costs compared to traditional financial systems.
Bitcoins can be bought from various international exchanges using credit cards or other electronic means.
What is the market complexities in regulating bit coins?
Volatility-Bitcoin has appreciated by close to 2,000 per cent in 2017-2018 and it is uncertain to predict the growth of the market.
Illegitimate -A huge number of new “copycat” currencies well over a thousand have been created so far.
Many bitcoins are created by fraudulent agencies with complex methods in such cases many gullible investors have lost huge sum of money.
“Initial Coin Offerings” (ICOs), where such fraudulent cryptocurrencies are launched, have become popular.
Bypassing regulations - It is possible to buy bitcoin for cash in one currency and sell it in another, with little trace of either transaction left in the global banking system.
Alternatively, it may even be possible to buy bitcoin in rupees, sell for a profit in dollars or yen, and claim export benefits on the trade.
Due to this bitcoins have been banned in many countries as they attempt to entirely bypass market regulators and break all the rules of their economy.
What initiatives government had taken on bit coin regulation?
Union finance ministry has recently decided to set up a panel for reviewing issues related with booming bit coin trade.
The Securities and Exchange Board of India (SEBI) is considering monitoring the market for fraudulent issues of new virtual currencies.
Reserve Bank of India had also cautioned users, holders and traders about the risk of these currencies.
As of now RBI has not issued any licence or authorisation to any entity or company to operate bitcoins.
The income tax department has also undertaken surveys of several exchanges dealing in these virtual assets.
It has also reportedly sent out notices to many high net worth individuals who might have been trading in these.
Though income tax department is clear in taxing cryptocurrency transactions, government is reluctant in recognising bitcoins.
