Naavi.org has earlier discussed Bitcoin in detail in several articles in the past. A list of such articles is available at
https://www.naavi.org/wp/index.php?s=Bitcoin
The gist of earlier discussions is
a) Bitcoin per-se is an electronic document recognized as such under iTA 2000/8 which cannot be denied admissibility in the Courts in India.
b) Bitcoin is a “Digital commodity” accepted for barter in a close community and not a “Currency” with the backing of a sovereign Government.
c) What is wrong with “Bitcoin” is its projection as a currency and its use in illegal activities.
d) The purchase and sale of “Bitcoin” involving payment and receipt of foreign exchange may be subject to foreign exchange laws
e) Mining of new Bitcoins in India is not illegal and purchase and sale of such indigenously mined Bitcoins cannot be considered illegal.
f) Purchase or Sale of Bitcoins which identifies legal mining activity and which has not at least once passed through the hands of a criminal in the past and not in violation of foreign exchange laws is also not illegal.
g) However, in the absence of proper tagging of Bitcoins, it is a risk for ordinary users to buy and sell Bitcoins since it is most likely to be tainted in a past transaction through the hands of a criminal.
Naavi.org was unhappy when RBI instead of providing proper and legal clarifications, issued an ambiguous circular and ED conducted raids on many Bitcoin exchanges giving an impression that Bitcoin transaction per-se was completely illegal. When a further clarification was sought from RBI, it threatened legal action against the person who sought the information.
The undersigned has always held that the Block Chain technology has great potential to replace the paper currency and though Bitcoin is too tainted to be given recognition, there is every reason for RBI to consider introducing a new Indigenous crypto currency with all the regulatory aspects that RBI can think of.
It is not out of place that much before Bitcoin became a reality, Naavi had promoted the idea of “Digital Value Imprinted Instrument System” which had the potential to substitute the paper currency as we know today with a hybrid instrument that is less expensive and relies on the digital security. Though applied for, Naavi could not get a patent for this idea and subsequently, some instruments did come up in India following the same principles.
Now it appears that RBI has recognized that the Block Chain technology which is the foundation of Bitcoin as well as other Crypto currencies may have a practical usage potential and is setting up an expert committee to analyze the issue. (Refer this report).
Naavi.org welcomes this move.
Readers are invited to explore all articles on Bitcoin at naavi.org and contribute their views if any.
It is to be recognized that “Block Chain Technology” can be used efficiently and without being adversely affected by the problems which Bitcoin was associated with. There will be concerns of “Security” of a block chain being hacked. But I believe effective checks can be established to prevent such security issues and the risks should be significantly less than what we face today in the form of fake currencies being printed by our neighbor countries as a par of their Proxy war strategy. Whether the committee will be able to grasp these intricacies or not is a point which we need to observe closely.
Naavi
Hope that the committee they constitute will actually comprise experts and not just career bankers looking at a technology which is still not understood by the best.
Secondly they seem to have some lofty national level goals and the risk is that one may fall flat looking at this to bring in a cashless society et al. It may be more practical to enable the use of the technology for internal use and then take it national.