In order to regulate the trade of cryptocurrencies such as Bitcoins in the country, the Indian government has formed a committee to fast-track the process and form a law for the same according to The Hindustan Times. This step follows the Indian authorities’ apprehension that black money is being used to trade in cryptocurrencies. The committee has representation from the departments of economic affairs, tax and from the RBI and the ED.
A government official was quoted as saying by The Hindustan Times that the law on cryptocurrency will address two main concerns. “The source of money being used to trade in them and regulation of exchanges of virtual currencies to protect the common man are the main concerns,” said the government official. “We understand the interest in Bitcoin, its value went up from a few hundred dollars some years back to about Rs 10 lakh now. But we need to ensure clean money is being used to buy VC,” he added. Another official said that the government is examining the the use of black money to buy virtual currencies. “Post-demonetisation, black money was channelled into buying VC, so we need to have rules to identify the source of money that is being used to buy VC,” said another government official.
Cryptocurrencies are virtual currencies (VC) that are created and held electronically. The transactions of virtual currencies are based on Blockchain technology and the value of any cryptocurrency is determined by demand and supply. In addition to Bitcoin, there are more than 1,300 such decentralised currencies such as Ripple, Litecoin etc. The popularity of virtual currencies, especially Bitcoins, is because of its skyrocketing market capitalisation. The total market cap of all cryptocurrencies has gone up to $750 billion between May 2013 and January 2017. The market cap of Bitcoin has increased 15-20 times in the past year.
Experts say Indians form around 10% of the total global trade in Bitcoin. The government had recently announced that cryptocurrencies such as Bitcoin are not legal tender in India, but have not banned its trade. Finance Minister Arun Jaitley had clarified that Bitcoin is not a legal tender in the country. He, however, also pointed out that the government will not take any knee-jerk action on Bitcoin. In India, there are 11 cryptocurrency trading exchanges identified by the government. The government on December 29 had cautioned investors to be wary of virtual currencies like Bitcoin, saying they are like Ponzi schemes with no legal tender and protection.