The Global Bitcoin Conference on Sunday sought for government intervention in the form of recognition and Reserve Bank of India's framework for greater adoption of the virtual currency in India, home to world's third largest internet users and largest software talent pool.
The conference said that the government and consumers will immensely benefit with the uncertainty being taken out of the bitcoin system.
"What we want here is a dialogue with the central bank for greater understanding of the system as well as what can be possibly regulated and what cannot be," said Sathvik V, MD of CoinMonk Ventures, one of the organisers of the event and a bitcoin exchange that sells and buys bitcoins. A lawyer from RBI has also attended the conference after a request from the organisers to understand the system better, but refused to offer any comments or identify himself.
Bitcoin has been acknowledged as a "legitimate currency" by the US lawmakers, which has resulted in value of the virtual currency shooting up to $1,000. The lawmakers and central bank in European Union have adopted a wait and watch policy, so has the RBI. In Germany, it is considered a private currency, while in China, it is considered a virtual commodity and transactions are taxed as such. In Switzerland, it is treated as a foreign currency and Canada already taxes gains on trade in bitcoins.
"The biggest threat for investing in the bitcoins is the threat of regulator coming up with any laws that affect the system retrospectively. What is more important here is not what bitcoins actually are but how it is perceived by lawmakers. Finally if consumer loses lot of money in a democracy, they will come back and ask the government as to why they did not protect them," said Na Vijayashankar, director of Cyber Law College.
Bitcoin community believes that recognition will create more awareness and reduce the speculation and volatility of the system. They see a huge opportunity in getting a share of the $70 billion remittances to India.
They feel that the current system takes a 10% commission on transfers whereas consumers can do the same in virtual currency without any cost.
They also claim that bitcoins being limited in supply - the algorithm allows only a certain amount of bitcoins to be “mined” or generated - is useful in fighting inflation and currency depreciation, calling the virtual currency "digital gold".
"Currently bitcoins bypass the banking system and hence drives it to black market and results in thriving illegal transactions," said Sunny Ray, director of business development at Buttercoin, a white label bitcoin exchange backed by funds, including Google Ventures, the investment arm of the internet giant Google. Ray added that unlike other illegal activities every bitcoin transaction can be traced and stored in millions of computers across the world. Buttercoin will be setting up a bitcoin exchange in the next couple of months in Mumbai with partners. He insists on getting a NBFC licence for running the exchange even though it is not a necessity currently in the country.
Globally, there are concerns of bitcoins being used as a money laundering channel. In October, the US government clamped down on Silk Road, an online marketplace that sold drugs for payments made in bitcoins.
"Anything can be used for illegal purposes. If RBI forms a framework, this will be one of the easiest systems out there that can be monitored by government agencies and there is no way one can destroy the trail of the currency," said Sathvik of CoinMonk.
The recognition itself is not driving people away from doing business in bitcoins. MadOverCoins helps people to buy physical goods from them in bitcoins.
Its CEO Vikram Nikkam has been doing this for six months with partners and buying the physical goods by paying in rupees, taxes duly paid. "The idea is to bring more users to the system. If I think about regulation that is going to come in future, I will not be able to do business today. That is a risk I am taking."