Crypto currency bitcoin is gaining popularity in India, especially among companies and high-net worth individuals, for buying and selling, or as an asset.
There are now online wallets that allow one to trade, buy vouchers of e-commerce companies, and even recharge one’s phone in bitcoin. Ahmedabad-based mobile wallet Zebpay allows one to buy, store, send and spend bitcoins through cell phone numbers.
“One can park money in the wallet in the hope that the value of bitcoins would go up. So in a way, it is like an asset class,” said Sandeep Goenka, co-founder and chief operating officer, Zebpay.
He added that companies and wealthy individuals have expressed interest in buying bitcoin as an asset class.
According to the Zebpay website, one bitcoin was valued at Rs 23,019.
Goenka said investments in bitcoin were fairly liquid. Investors had the option of selling them and getting out at any time.
Bitcoins’ attractiveness as an investment is high because the number of bitcoins that can be produced has been limited to 21 million, according to Satoshi Nakamoto, its founder.
Nakamoto is a pseudonym, of a person or group. Sources said 14.5 million bitcoins had been “mined” already.
As a result, the value will keep going up as the end of the supply nears. According to reports, one bitcoin is issued every 10 minutes; its supply is expected to reduce by 50 per cent every four years.
Recently, Ratan Tata, the former Tata Sons chairman, invested in Abra, a Silicon Valley bitcoin start-up.
Bitcoin is a virtual currency, or crypto-currency, used only for online transactions. They are not backed by any central bank in the world but are traded on a number of exchanges or swapped privately.
However, the Reserve Bank of India is not been very comfortable with bitcoins and has raised warning signals. The first red flag was raised in December 2013 when the central bank highlighted various shortcomings in the transactions of these currencies.
One major concern was that bitcoins were used for peer-to-peer transactions, and were not backed by any regulator or payments agency. Therefore, in case of a crisis or default, consumers will not have any recourse. Another major concern that remains is that, the value being traded is speculative and therefore investors can end up burning their fingers.
However, Zebpay COO Goenka tried to allay these concerns saying that there is no regulation in the country making bitcoins illegal.
“In fact, the law firm headed by Nishith Desai who is also an advisor to several big companies, and to us, has published a white paper on it explaining that no regulation in the country point out that it is illegal.”
Goenka added that the warning signals from RBI were raised at a time when several other regulators across the world were also perplexed with the sudden rise in the value of bitcoins.
“December 2013 was a time when few people knew about bitcoins and the price went from about $100 to $1,100 in a month. It was unprecedented. So people started seeing it as a quick way to get rich. They started seeing it as a bubble and that is why regulators raised an eyebrow. However, things have changes since then. Moreover, they are trying to warn people that it is a risky investment and people who are not tech-savvy or don’t know about it shouldn’t get into it.”
The fluctuation in the value of bitcoins is another area of concern for the regulators across the world.
Apart from Zebpay there are other players as well that are gaining ground in this space. Coinsecure is a bitcoin trading platform that allows one to buy and sell these virtual currencies. The company was set up in June 2014 and offers mock trading services to familiarise new users with the crypto currency. Another player that has been active in this space in India is Unocoin, the first Indian bitcoin start-up to be funded internationally in August 2014. It allows consumers to buy, sell and store their bitcoin in a wallet.
The supporters of virtual currencies argue that these are a much secure option as compared to bank transfers, debit or credit cards. This is because the bitcoin transaction involves a private code which is set to be nearly impossible to crack.
However, there has been a security breach around a bitcoin exchange in the past which the supporters argue was an exception and also a lapse on the part of the individual and not a system error. In February 2014, Mt. Gox located in Tokyo, which at that time was the largest bitcoin exchange in the world lost 850,000 bitcoins, valued at over $400 million.
Goenka agreed that it will take time for bitcoin wallets in India to reach a significant proportion but they are surely seeing increased interest.
At present, Zebpay has about 25,000 users in the country and the platform is adding about 3,000-4,000 new users every month.
“The trading volume has jumped from Rs 10 lakh a month a few months ago to Rs 10 crore a month whereas the non-trade volume which includes recharges, shopping vouchers etc has also jumped growing 40 per cent month on month. Our ambition is to become a global wallet player powered by bitcoin,” said Goenka.
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What is bitcoin?
A bitcoin is a virtual currency, used only for online transactions. They are not backed by any central bank in the world but are traded on a number of exchanges or swapped privately
How to buy and sell them?
You can “mine” Bitcoins — or generate new coins — through complicated software procedures. Or you can buy and sell them on exchanges from companies like Zebpay
What are the RBI guidelines on bitcoins?
RBI has raised concerns about the use of bitcoins, but has’t come out with a regulation yet