For most Bitcoin and cryptocurrency enthusiasts, the answer is a vehement "no". Let's see what stakeholders have to say.
Bitcoin prices have been seeing a downward spiral since the last week of December 2017.
At the time of publishing this article, the price of one Bitcoin stood at close to $11,174, according to CoinDesk, a sharp fall from $19,343 which the cryptocurrency hit mid-December last year.
While seeing a downward trend since the start of this year, market experts think that the negative-to-neutral outlook towards the cryptocurrency has contributed to this trend.
A recent Goldman Sachs report from its Investment Management Division, ‘(Un)Steady as She Goes’, had called the Bitcoin bubble to be bigger than the equity and tulip bubbles.
The report stated,
“We think the concept of a digital currency that leverages blockchain technology is viable given the benefits it provides: ease of execution globally, lower transaction costs, reduction of corruption since all transactions could be traced, the safety of ownership, and so on. But Bitcoin does not provide any of these key advantages.”
Further, the report also stated that the rise of Bitcoin’s price, no doubt, has pushed the cryptocurrency into bubble territory.
Earlier this year, the French and the German governments sought to take control of the cryptocurrency mania by clamping down on trading cryptos and creating new regulations for the same.
Even Nordea, the largest bank in the Nordic region (of Finland, Sweden, Iceland, and Norway), has, citing high risk, forbidden its 31,000 employees from trading in cryptocurrencies such as Bitcoin or Ether.
On the sharp fall prices, Ashish Agarwal, Founder and CEO of Jaipur-based crypto exchange Bitsachs, said,
“In my understanding, there seems to be a sense of panic globally around Bitcoins, especially when there is news of clampdowns by governments.”
Hesham Rehman, CEO and Co-founder of Warangal-based cryptocurrency exchange Bitxoxo, opined this is not the end of the price rise. He stated,
“The price of Bitcoin has been dropping globally due to the dissent in views for the adoption of cryptocurrencies in both international and India markets. However, the increasing demand for Bitcoin will induce the growth in price once again.”
Amanda B Johnson, the spokesperson for open-source, peer-to-peer cryptocurrency outfit Dash, told YourStory that stabler days are yet to come. She added,
“The current cryptocurrency market is more than double of what it was worth even 90 days ago. These volatile up and down moves are likely to continue for a long time, but they will smooth out as the cryptocurrency market gets larger. Remember that approximately one percent of the world's wealth is in cryptocurrency right now. When that number gets to 10 percent, 20 percent, or more, we'll start to see more clear winners and losers in the space, and a decrease in volatility.”
India needs regulations in place
Closer to India, cryptocurrencies continue to be in the grey.
Recently, Business Standard reported that the Registrar of Companies, MCA has stopped registering any cryptocurrency exchange in its platform.
It was also reported that investors need to pay 20 percent advance tax on cryptocurrency earnings.
For cryptocurrency exchanges in the country, things continue to be complicated. It is an open secret that the top banks of the country have withdrawn their support, suspending accounts and removing payment options of some of the major exchanges in India.
Further, it has been reported that these banks, including Axis Bank, ICICI Bank, and YES Bank, might cap withdrawals from the few accounts that are operational.
The founder of a Bitcoin exchange, who didn’t want to quoted, explained that this freeze-up has been going on for the last eight months, with Axis Bank being the first to pull out support. The founder further said,
“The volume and value of transactions seen on these exchanges have grown since May last year. With regulations in the grey area, the banks might have felt the insecurity of not participating in these multi-crore transactions.”
However, seeing revenues in these big-ticket transactions the small banks do not seem to want to pull out of the equation immediately.
But with the big banks pulling out, Indian crypto exchanges might face some difficulty while transacting in fiat money (legal currency of the government).
Ashish spells out the obvious: “First for all, banking is a must when it comes to fiat money. We don’t see any substitute for that.”
Rahul Raj, Co-founder of cryptocurrency exchange Koinex, however, predicts a colossal change, which better understanding of the tech would usher in.
“The market is not going to stop. Rather we see the Indian market is exploding. There needs to be a solid understanding of Blockchain tech. Once the perception of Blockchain moves from just tokens to everyday transactions, the entire perspective will change," he said.
Perhaps, in an exercise to bolster that change, Bitcoin exchanges in India are introducing other cryptocurrencies and tokens, like Litecoin, Ripple, Ethereum, and Bitcoin cash on their platform. Although transacting in fiat money will be a problem, investors can trade one currency for the other on these platforms.
Apart from the news on banks pulling out, it has also been reported that cryptocurrency investors have to pay a 20-percent advanced tax on earnings, to avoid any action from the Income Tax department.
Tax experts claim that to start with cryptocurrency isn’t defined either as a good or a service in India, creating further complications on matter of taxation.
Last month, IT officials had conducted nationwide surveys at different cryptocurrency exchanges. According to the Indian exchanges, the survey was rather good since the government and officials were checking on the KYC of the investors and looking to see the source of their funds.
A founder of a Bitcoin exchange in India shares that with no option given by the RoC on registering as a Bitcoin or crypto exchange has led some exchanges to register themselves as software companies.
Commenting on the state of regulations in the country, Ashish advocated bolder government action.
“The government will have to take a stand on whether crypto is good or bad for the people of India. And that also might not guarantee that crypto trading will stop. Rather banning it and not having regulations around it might create a bigger room for fraud to increase,” he said, suggesting that the government should make this possible in a legitimate way, where innocent people aren’t cheated.
Hesham of Bitxoxo, too, opined for clarity from the state. He said,
“The government needs to make their stand clear on cryptocurrency regulations. It needs to clear the tax structure imposed on the exchanges or should build new tax structures for crypto exchanges in the country.
Earlier this month, the finance ministry had stated in the Parliament that Bitcoins or any other cryptocurrency are not legal tender. Having said that most Indian exchanges seem to be seeing a breakout on transactions, considering the environment and sentiment around cryptocurrency.
According to Ashish, Bitcoin is an asset till ITS mining is profitable. He added,
“Bitcoin mining might get expensive in the future. Recently, China has been removing subsidies for any sort of activity where the government has no revenue. This increases electricity costs, which is one of the fuels to mine Bitcoins. This also forces miners to look at countries like Russia and Iceland. Also, hardware hasn’t been developing at the same pace as the demand for Bitcoin has.”
According to some estimations, Chinese mining pools control a little more than 70 percent of the Bitcoin network’s collective hash rate.
Recently, TechCrunch reported that China seems to be clamping down on Chinese miners.
According to a survey done across 3,000 participants in India, Indonesia, Japan, Russia, the UK, and the US by cryptocurrency PoS (Point-of-sale) provider, 68 percent of the Indian survey group knew of Bitcoin, 40 percent knew Litecoin, 28 percent knew Ethereum, 21 percent knew Ripple, 19 percent knew Dash and 15 percent knew Stellar Lumen.
The survey target set included 500 Indians.
When it comes to the reasons why people don’t want to purchase Bitcoin or other cryptocurrencies, 22 percent said ‘they don’t know what cryptocurrencies are,’ 19 percent thought it is not real money, 18 percent indicated that they don’t know what the cryptocurrency is and 18 percent of the respondents said the value of the Bitcoin is not stable.
As a response to these findings, Zac Cheah, CEO and Co-founder of Pundi X, said,
“From this survey, we confirmed that the uptake of cryptocurrency is high in India. As the interest of owning cryptocurrency among the mainstream is growing, there are still some challenges for the mass adoption in India. One of them is ‘the knowledge about cryptocurrency’.”
With these observations, it is time that international bodies take notice of the cryptocurrency boom and lay the foundation for regulating and educating people of its use.
- Ashish Agarwal
- Rahul Raj
- Pundi X
- Amanda B Johnson
- Zac Cheah
- Hesham Rehman