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

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 Transaction fee hits an all-time high, adoption pushing the prices higher

Bitcoin transactions have been experiencing an uptick thanks to widespread adoption across the globe. What started off as a pet peer to peer payments project has now become an alternative to the existing financial system. Tried, tested and facilitated by individuals who believe that the disruptive nature of the currency will find major applications, Bitcoin has indeed come a long way. What makes the cryptocurrency so lethal is its ability to provide near zero cost transactions and without the interference of a third party for confirming. Added to this, the network also ensures a degree of anonymity and consensual security that makes it more preferable. Eight years have passed from the inception of the cryptocurrency and something interesting is happening in the start of 2017. Let’s delve deeper into the details:

The transactional boom:

Gradually Bitcoin experienced a steady increase in adoption in 2016. With most of the countries advocating digitalization of transactions to promote a cashless society, things have looked good for Bitcoin. With the kind of attention Bitcoin has garnered, the positives of the currency have been highlighted and has caught the public attention. It was just a matter of time before the currency went from just a speculative asset to an alternative investment means. Finding mainstream adoption, the currency has experienced a boom in its transaction owing to heavy merchant adoption.

Increasing Vendor acceptance:

As referenced already, the merchant and vendor adoption has been increasing steadily. Coinmap shows that currently there are around 9000 recognized vendors accepting Bitcoin worldwide as compared to 4000 in 2015. The online merchant acceptance has also increased drastically with Japan itself having around 20,000 online merchants that accept Bitcoin in payments. The abolition of 8% sales tax and favorable legislation encouraged the transfer of this asset seamlessly. Same has been the case with rest of the Asian countries where the legislation has helped the innovation.

The all-time high transaction fee:

The Bitcoin transaction fees are at an all-time high, up by 1289% since March 2015. The Bitcoin transactional volume has gone up by 173% over 2015, equaling 3 transactions per second. The increase in the volumes can be reflected through local bitcoins. Localbitcoins has shown that countries where the inflation is high[Nigeria and Venezuela]  are significantly adopting to Bitcoin transactions. With steady increase in value and application, Bitcoin would surely become the prime means of exchange in good time.

Here’s Why Bitcoin Deserves a Place in Your Portfolio

Bitcoin deserves a place in your portfolio irrespective of what ‘smart’ conservative money managers would have you believe. Bitcoin is a disruptive technology because its creates a new market in how financial transactions are handled. Bitcoin also has the potential to disturb the traditional monetary system and eventually displace money (fiat currency) as we currently know it.

Of course, it wouldn’t be wise to sell all your assets to buy Bitcoin or to put all of your investment in Bitcoin; yet, you’ll be doing yourself a major disservice if you refuse to join the bandwagon of early adopters who are investing in the potential of Bitcoin. This article provides insight into some of the reasons why you should endeavor include Bitcoin in your portfolio in order to reap the benefits of diversification.

1. Bitcoin is not a passing fad

Many products and services often come into limelight with a tag for being “disruptive”, only for them to fizzle out of existence after a couple of years. Bitcoin is not a passing fad and it is here to stay. To start with, Bitcoin (built on Blockchain technology) imbibes the very essence of the most disruptive 21st century technologies. Bitcoin has a mobile-first approach, it is open source, it facilitates peer-to-peer transactions, focused on privacy, and encrypted with cryptography. No other financial/monetary product is fortified with all the technologies that give Bitcoin its unprecedented level of usefulness and security.

2. Bitcoin has direct application across hundreds of markets and industries

Many people erroneously assume that Bitcoin is only useful for sending and receiving payments when you don’t want to go through banks. The assumption is reinforced by the fact that Bitcoin was the choice payment system for questionable transactions on places such as Silk Road. Nonetheless, Bitcoin could compete with fiat currencies for direct applications in a wide variety of markets. Bitcoin has direct applications in the $1 trillion e-commerce market, the $515B annual remittance market, and in the $2 trillion annual e-payment market among others.

3. Tech and finance heavyweights already support Bitcoin

Bitcoin is still in infancy and it’s adoption is still a long way off from gaining traction in the mass market. Nonetheless, Bitcoin is already getting rave reviews of heavyweights in the technology industry. Paul Buchheit who founded Gmail has opined that “Bitcoin may be the TCP/IP of money.” Bill Gates, founder of Microsoft says Bitcoin is “a technological tour de force.” Richard Brown, an executive at IBM notes that “Bitcoin is a very sophisticated, globally distributed asset ledger.”

 Heavyweights in the finance sector have also lent their voice to support Bitcoin. For instance, top-tier venture capitalists such as Peter Thiel, Marc Andreessen, and Fred Wilson have invested in the technology.

4. Bitcoin’s adoption is on an uptrend globally

Bitcoin might still be in infancy but its adoption shows a predominantly upward trend globally. The U.S. government is already toeing the path of acceptance and regulation for Bitcoin in the U.S. Bitcoin has earned the title of digital gold in Germany. The adoption of the cryptocurrency has grown rapidly in China and India in response to some of the monetary policies of the government. Available data shows that in Q1 2016, there were more than 13 million Bitcoin wallets to account for a 60% year-over-year increase. More so, the hashrate on the Bitcoin network was 1,028 pth/s to mark a 300% year-over-year increase.