Adoption Archives

Indian Government forms committee to examine framework for Bitcoin: Bitcoin most likely to be made legal

Posted on April 15, 2017 | by [email protected]

India has never legally banned Bitcoin or other cryptocurrencies but traditionally employed a hands off approach towards them. They have always maintained that they are not currently versed with the technology required to monitor digital currencies and would take sufficient time before formulating a framework that enables them to do so. With increasing Bitcoin volumes on Indian exchanges and circulating petitions to legalize Bitcoin, the Indian Government has now been put in a position where inventing a framework to regulate Bitcoin has now become a necessity. Let’s look into how Indian Government is planning to formulate the framework:

The perfect set-up:

In November 2016, when the Prime Minister of India banned higher denomination currency notes and took a good couple of months before bringing new denomination into circulation. During this period, the government’s initiative has been to motivate the populous into shifting more towards digital payments. Digital payments application companies that enable micropayments like Paytm and Freecharge have enabled this transition and helped for more centralized regulation of transactions. However, a byproduct of this move was the rise of Bitcoin transactions within and in and out of the country. The BTCINR trading prices were over 20% than the premium depicting the boost the cryptocurrency received during this period. This has laid down the foundation for consistent adoption of Bitcoin in India and forced the government into finding ways to regulate it.

The proposed committee:

The Inter-disciplinary committee established by the Indian Government includes the Central Bank, prominent members from the ministry of Finance and other prominent financial bodies to delve into the framework requirements of Bitcoin regulation. Earlier in February, India’s Bitcoin ecosystem consisting of young companies and Bitcoin businesses established a private self-regulatory body to proactively prevent illegal use of the cryptocurrency. The formed government committee would produce a report on Bitcoin basing on the underlying technology, its usage in India and regulations across the world. If India goes down the path of legalizing Bitcoin, it would be a valuable addition to the Bitcoin adoption space. The Asian Bitcoin ecosystem is already enriched with Japan and Philippines embracing the cryptocurrency and giving it a legal status. With Russia and India looking forward to regulate the cryptocurrency, things seem very positive for the cryptocurrency.

Task order for the committee:

The announcement from the Indian Government had the following excerpt:

“The circulation of Virtual Currencies which are also known as Digital/Crypto Currencies has been a cause of concern….Reserve Bank of India [the country’s central bank] had also cautioned the users, holders and traders of Virtual currencies (VCs) including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.”

The task order laid out for the committee in the next three months are as follows:

Checking on the present status of Virtual Currencies both in India and globally
Examining the existing global regulatory and legal rules of compliance governing Virtual Currencies
Suggest measures for dealing with such Virtual Currencies in areas such as consumer protection, money laundering, etc; and
Examine any other matter related to Virtual Currencies which may be relevant.

Bitcoin Price Analysis: End of the Sideway Movement and Bitcoin All Set for the Next Big Launch

Posted on April 7, 2017 | by [email protected]

Anyone who has followed the Bitcoin price closely in recently would see a pattern Bitcoin prices have been following. From the second half of 2016, the month over month price of Bitcoin has been increasing steadily, irrespective of the type of negative fundamentals the currency had to deal with. Momentary price dips have been countered effectively to keep the Bull Run going up until the start of the New Year. However, the scenario changed from the start of 2017 with Bitcoin prices remaining predominantly sideways in between the $1000-$1250 range. Irrespective of the fundamental reasons, Bitcoin has consolidated enough in terms of volumes to prepare for a good run. Let’s look into how fundamentally and technically Bitcoin stands in terms of an impending run.

Fundamental Analysis

Bitcoin has been contained between $1000-$1250 by various fundamental factors which include the consecutive ETF rejection and the scalability debate. Now that the Bitcoin community seems to have come to some kind of compromise over the block size, the prices have stabilized. More importantly, the block size increase would now accelerate the transactions and increase the Bitcoin’s utility by a great margin. Things look more favorable now for a Bitcoin bull run owing to the dynamics in Japan and Mexico. Japan has legalized Bitcoin as a digital asset and a valid way of transfer starting from April 1^st. With 260,000 Japanese vendors all set to accept the digital currency, things are looking very bullish for Bitcoin.

In the western part of the world, Mexico has introduced a bill to legalize Bitcoin which would in turn fire up the remittance market and increase cross-border Bitcoin transactions. With strong adoptive fundamental factors driving the prices, Bitcoin looks charged up for the run.

Technical Analysis:

Technically, Bitcoin has been in a trend and has fallen into a temporary sideways pattern. While the market players are testing the $1200 psychological barrier (at the time of writing this article), the Bollinger bands suggest that a breakout can be expected, and, given the trend it can very well be in an upward direction. While the market still has the potential to drop till $1,100 before making a final launch, it would be wise not to short in such a market. Even the RSI Indicator is in the mid region showing that there is still buying potential in the market and it’s not advisable to short recklessly in the market.

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Bitcoin Businesses in India Petition to Make Bitcoin Legal, Can India Become the Next China?

Posted on April 4, 2017 | by [email protected]

India is a country with a good amount of smartphone and technology penetration. Traditionally, India has been the back office for most of the multinational companies owing to its time zone advantage, cheap and skilled labor and diligent technical skills. With the recent outburst of cheap and affordable smartphones in India, there has been a good amount of smartphone penetration leading most of the upcoming Indian e-commerce startups to go completely app-based rather than investing much on the traditional website. India is potentially one of the countries where with a good amount of adoption, Bitcoin volumes can inflate exponentially. However, the Reserve Bank of India has had a neutral standpoint towards the digital currencies. RBI has stated that they are not regulating Bitcoin or other cryptocurrencies yet and would like to observe and understand the technology better before adoption. However, Bitcoin businesses in India have filed a petition to make Bitcoin legal. Let’s dive into the details of the petition and the impending effects.

Bitcoin booms in India

While Bitcoin transactions in India initially were considerably low, Bitcoin mining activity has been very high since 2012. GB Miners group have 9% hashing power of the Bitcoin network, paralleling their western counterparst, making them the largest Bitcoin mining group in the country. With the Indian Government’s demonetization move, the country was forced to go cashless and this saw a rise in Bitcoin transactions and Bitcoin prices. The demonetization ended at the start of 2017, but the effects are still persistent with lower cash withdrawals being observed at banks and ATMs. This has built the required momentum for Bitcoin adoption in India.

The petition

The petition comes at a time when Bitcoin is making regional headlines due to statements from policymakers and politicians who have raised concerns about the lack of regulation surrounding the bitcoin industry. As the government is sticking to the hands off approach, big players in the Indian bitcoin industry who welcome regulation have banded together to launch a self-regulatory body to ensure adherence to KYC and AML norms called The Digital Asset and Blockchain Foundation of India (DABFI). DABFI has launched a petition calling for the explicit legality of bitcoin and other cryptocurrencies in the country. Their main motive is to develop an amicable environment for the development of Bitcoin and other cryptocurrencies.

What can India do to Bitcoin?

India is the second most populated country in the world relying heavily on micropayments. This is especially true for the small scale and medium industries that play a vital role in the country’s economy. With sustained adoption, Indian Bitcoin adoption can be a game changer for the cryptocurrency. Unlike China where the Bitcoin is only now a speculative vehicle, India can do justice to the true stature of Bitcoin and nurture the currencies through large scale adoption and eventually using its massively brilliant technical force for Bitcoin engineering. The verdict for Bitcoin’s legality in India might be set sometime in April. How the Indian government’s judgment would impact Bitcoin is to be seen.

Adoption takes reigns in Japan, replaces US in terms of monthly volumes

Posted on January 23, 2017 | by [email protected]

Bitcoin markets change significantly over time, which creates an intriguing paradigm shift. China remains the largest market for Bitcoin trading in terms of volume with a whopping 96% domination. It is followed by the USD market which held this place firmly for a good period of time. Over the past few days, there has been a significant growth in the Japanese market, catapulting it to the second place in terms of volume. After the Mt. Gox debacle, the Bitcoin scenario in Japan has recovered cautiously from that point. Let dive deep into the dynamics to know how exactly Japan took volumes away from USA:

Drop of sales tax and efforts of exchanges:

The Japanese Government has dropped the sales tax on the purchase of Bitcoin and Cryptocurrencies in October. Initially a sales tax of 8% was levied on purchase of any cryptocurrency. While this move is attracting traders, it is also influencing the merchants across Japan for better adoption. Major exchanges in Japan like BitFlyer, Coincheck and Zaif have all launched campaigns that would attract the masses. BitFlyer launched a sophisticated trading platform for professional traders and an illustrated Blockchain explorer that have gone famous. Zaif bitcoin exchange launched an investment service that has been gaining lot of attention. The investment service is dollar cost averaging investment service, shielding users from bad investments.

Increasing merchant adoption:

Right from their launch, BitFlyer and Coincheck have pushed for merchant adoption by promoting Bitcoin transactions across merchants. So as to make Bitcoin a part of daily life, Coincheck has enabled payment of utility bills through Bitcoin. They have a dedicated ‘Coincheck Electricity’ platform that makes this possible. Having bitcoin payment available for something like a utility bill, that has a reliable image, has definitely put bitcoin in positive light. These efforts have surely paid off as Japan now has around 5,270 merchants and websites accepting Bitcoin. BitFlyer has even initiated talks with the Japanese Government for transacting in Bitcoin for Government operated websites and payments.

How does the future look like?

The given rise in volumes should not be treated as a momentary surge but rather as fruits of steady adoption. With Chinese exchanges looking to impose transaction costs on BTC-Yuan trading pair, BTC-Yen looks to be the better alternative. With no service tax, traders would find it lucrative to trade across Japanese exchanges. Especially automated traders that provide volumes to the market would look to cut down on cost through Japan. If not a complete Chinese volumes, at least a part of it would be redirected to Japan restoring its previous glory prior to Mt. Gox debacle.

‘Big 4’ step up the Bitcoin game, EY accepts Bitcoin in Switzerland

Posted on December 5, 2016 | by [email protected]

Ever since ‘Internet of Things’ has proved itself as a prudent innovation, Big four firms have their eyes set on these innovations. The consultancy divisions of these firms are closely monitoring IOT to evaluate the possible investment opportunities for their clients. This is evident from the PwC report on IOT, released in mid-2015 exploring the unlimited possibilities and open markets for application. After the advent of Bitcoin, Blockchain technology has received no different treatment. The cryptocurrency and its underlying technology have received the same amount of attention owing to its disruptive nature. Pretty recently after Deloitte, EY made a move in Bitcoin. Let’s look into the details of how this would impact Bitcoin:

Deloitte launched ATM in September:

On Wednesday, September 7^th this year, ‘Big Four’ accounting firm Deloitte has opened its first operational bitcoin ATM. The opening was quiet and took place in the downtown Toronto offices of Deloitte’s Rubix blockchain division. The bitcoin transaction machine, or BTM, is now all set to exchange digital currency for Canadian dollars. The move was intends to make Deloitte employees well acquainted with Bitcoin and Blockchain. Owing to the firm’s interest and belief in the cryptocurrency and its underlying technology, Deloitte has taken the first step towards it by this move.

EY joins the band wagon:

In a surprising move that will completely boost adoption, EY announced that their Swiss firm will soon begin accepting bitcoin. The firm also installed a Bitcoin ATM (BTM) in their main office building, next to the Hardbrücke train station in Zurich. The BTM is publicly accessible to exchange Swiss Francs for Bitcoins. The firm also gave away bitcoin wallets to all of their employees. The effort is in the direction of completely ‘digitizing’ their operations to suit the pace of the changing world.

Marcel Stalder, CEO of EY Switzerland said –

“It is important to us that everybody gets on board and prepares themselves for the revolution set to take place in the business world through blockchains, smart contracts and digital currencies.”

The impact on adoption:

Switzerland has a very amicable environment for the growth of cryptocurrency. With a well-developed bank and technological infrastructure, going cashless can definitely be the next objective for Swiss folk. KPMG has recently remarked about the same in their report “Shaping Switzerland’s digital future”. For Bitcoin, this would be a very impactful move as this would accelerate mainstream adoption. With auditing firms accepting the currency, the solution to the problem of auditing Bitcoin related transactions would become apparent.

Bank of Tokyo and IBM come together for a Blockchain Venture

Posted on September 16, 2016 | by [email protected]

The exact measure of success for any technology is its ability to impact and transform traditional set-ups. This is exactly what makes Bitcoin and its underlying technology so valuable and hence they are being termed as disruptive. Blockchain technology has transformative potential and major financial institutions are trying to adopt the same so ease their process. This grand scale adoption has in turn made the adoption of currency viable and has driven up the value recently. Let’s look into a recent blockchain adoption story where IBM partnered with Bank of Tokyo for managing contracts on blockchain:

Bank of Tokyo, IBM and Blockchain:

Bank of Tokyo-Mitsubishi UFJ (BTMU) plans to begin managing its contracts on a blockchain-based platform. This platform relies on technology provided by the still in-development Hyperledger project and the design services of IBM. The two companies confirmed that the platform will manage service level agreements between BTMU and other third parties. IBM’s vice president of blockchain Ramesh Gopinath told that the first phase of building the platform is complete. This allows a detailed tracking of workflows within the Japanese bank. The second phase is now underway to connect workflows between companies.

Gopinath explained how the integration will work as follows:

“You capture the entire workflow all the way to a master agreement and special workflows for employees. If you capture the metrics that are relevant, hopefully in the new model there will be fewer disputes”

According to a release, IBM and BTMU will first trial the service by transacting with each other over the platform. BTMU intends to ultimately migrate to the new contract management platform by the end of fiscal year 2017.

Germany Energy Giant now accepts Bitcoin for payment:

German Energy giant backs bitcoin payments

Customers of one of Germany’s largest energy providers ‘Enercity’ can now pay their electricity bills with bitcoin, the company announced. One of the ten largest energy companies in Germany, ‘Enercity’ has a turnover of around 2.3 billion EUR. It provides energy and services for residential customers in the Hanover region, as well as for business customers throughout Germany. Enercity has cited increasing popularity of Bitcoin and its ability to “act independently of central institutions” as the reason for the decision. It said that Digital payment methods such as Bitcoin are becoming increasingly popular. Enercity therefore now allows bills to be paid with Bitcoin.

Thus with these advancements in implementing Blockchain and accepting Bitcoin payments, the prices sure are to be affected to a certain extent.

Why to Think Twice About Investing in Bitcoin ETFs

Posted on September 14, 2016 | by [email protected]

What are ETFs?

An ETF is a type of fund, traded on stock exchanges, that hold assets tracking the value of an index. Authorized participants, which are generally large financial institutions, buy and sell large creation units of the ETF to break up and distribute in smaller quantities. ETFs were created in 1993 as a tool for investors to track the value of market sectors, niches, and trading strategies.

Why ETFs? Why Bitcoin?

ETFs can help reduce costs, improve liquidity, strategize against capital gains taxes, diversify portfolios, and improve transparency for investors.

Financial professionals are racing to be first to market with an ETF for emerging market sectors. Bitcoin has grown to the point of receiving this attention. Leading the charge are the Winklevoss brothers, who introduced Bitcoin ETFs to the SEC in 2014. If readers are interested in the prospectus, it’s available on the SEC website.

Drawbacks of a Bitcoin ETF

Although the benefits of ETFs have contributed to their rising popularity, ETFs have drawbacks that can be exaggerated in their developmental stages. In 2011, Fidelity published a piece on the drawbacks of ETFs. Of those that Fidelity listed, buying high and selling low, management fee creep, and tracking error seem as though they could be particularly pronounced when evaluating a Bitcoin ETF.

Buying high and selling low describes the spread between bid and asking prices for ETFs. If this spread is
high, the cost of purchasing (or the benefit of selling) may not accurately reflect the value of the ETF. In an ETF with few transactions, it’s likely that the spread will be greater than in an ETF with regular, or practically constant transactions as the curve of people’s willingness to sell/buy will be smoother.

Management fee creep describes the administrative costs of ETFs. In a developing fund, the costs of marketing could be reflected in the management fees. Given the uncertainty and slow adoption of Bitcoin across traditional financial markets, marketing costs could be higher for a Bitcoin fund.

Tracking error describes the deviations in a fund’s investment performance from the index that it tracks. Given the volatility of Bitcoin, it could prove difficult to accurately align with the indexes of choice. This can be a cost to investors.

Broader Implications for Bitcoin

If the Winklevoss Bitcoin ETF is approved, it would signal faith in Bitcoin from the U.S. federal government. This faith could improve investor confidence and the value of Bitcoin itself. As a byproduct of a legitimizing a cryptocurrency investment vehicle, Bitcoin investment would likely be subject to a greater degree of scrutiny from the federal government and regulatory agencies. This could incentivize greater transparency for other methods of Bitcoin investment, improving access to the Bitcoin market.