Bitcoin surge poses a challenge to India

MUMBAI: The control freak Indian regime is confounded. If it were trading in strange bird emu, or export of cotton or onion, the government could answer any uncomfortable situation with a ban.

But here’s one that neither the Reserve Bank of India nor the government can do much about – bitcoin. The digital currency is throwing a challenge to the Indian regulators even as those in the US keep off it.

China has banned financial institutions from accepting it. Norway and Germany say they will treat it as assets and not a currency. What will India do? Nothing concrete as yet.

But its popularity is growing and that may cause a headache for the government and the RBI. Investors in India have a convenient way of blaming it on regulators rather than their stupidity.

Data indicates that it is fast becoming a instrument for speculation with possibly disastrous consequences. In November 2012, when Mahim Gupta started the portal BuysellBitco.in, there was one trade in three days. In January, every day saw a transaction.

When in April, the price of bitcoins shot up to $265 a piece from $13 in January, the number of deals jumped to 30-50 a day. Indians residing in the country are estimated to be in possession of 50,000 bitcoins sold in Indian market.

Bitcoins, the digital currency, was created by Satoshi Nakamoto in 2009. These are little more than computer-created to a set algorithm and traded between online wallets.

The supply of bitcoins cannot exceed 21 million by 2140. So far, 57% of the total bitcoins are in circulation.

That essentially means the fad, if it continues, could lead to a bubble. “I have earned 17 bitcoins by making a gaming website,’’ says Bangalore-based Benson Samuel.

“It was a gamble worth taking as the value has trebled since then. In the next year or so, you will see more acceptance of the bitcoin. The instance of illegal mining is not much as bitcoin leaves a digital trail and is not as anonymous as currency or gold.”

In the history of human civilisation, even gold and sovereignbacked currencies have seen their value erode. What is in store for the one that cannot be even seen or felt is anybody’s guess.