Bitcoin: Is India ready for the virtual currency boom?

With the advent of debit/credit cards and online trading it was said that currency notes would soon vanish from the markets. While this did not happen it made financial transactions much easier and quicker. This also ushered in a virtual and dark world of financial fraud. Governments and regulators have since been hard pressed in checking fraud and adapting to changes around the world. One challenging development in the online trading space is the growing popularity of virtual currency, and among the many it is Bitcoin that is jingling the loudest. Bitcoin is a decentralised digital currency which is an open source peer-to-peer electronic mode of payment. The risk with virtual currency increases when there is no authorised regulator for what is essentially a private enterprise. With an almost zero physical presence the fear is that this could be misused by fraudsters to lure gullible investors. Its virtual and unregulated nature makes it suitable for online gambling, illegal drugs, etc. While Bitcoin is relatively marginal in everyday real-time transactions, it is mainly used for speculative investments — in which the potential risk is exponentially high.

The Reserve Bank of India (RBI) is, and rightly so, concerned over the growing popularity of Bitcoin. As for now the RBI is adopting a wait-and-watch approach. But it is doubtful as to how long it can stay on the sidelines and observe the developments without intervening. This is mainly because of a sudden increase in the demand for the virtual currency. With many establishments in the United States, China and not to mention online sites accepting Bitcoin, pressure will increase for its transaction in India.
With the markets being volatile and gold — the preferred investment option in India — losing its sheen, Bitcoins are likely to draw the investors’ attention. Add to this the fact that its value has surged almost five times — from $207 a few months back to $1,000 (Rs 63,000). With millions of transactions daily the world over and a total circulation estimated around $1.5 billion, Bitcoin by its sheer volume demands that government financial regulators keenly watch it. This should be a top priority for the central bank and the finance ministry and proper checks and balances are essential to make sure that the Indian investor does not burn his fingers dabbling in this.