Why is bitcoin trading gaining so much traction? What has led to the upswing in prices?
In the past few months, the trend in bitcoin prices has attracted investors from across the globe. The price of a bitcoin jumped five times from around Rs 65,000 in January 2017 to Rs 2.7 lakh in September 2017. The factors that have contributed to the price rise include the growing acceptance of bitcoins around the world, the Japanese government’s formal recognition of the cryptocurrency, and the growth of international money-transfer services that use bitcoin to move cash from one country to another. But this drastic price rise was followed by severe volatility, which will be major challenge going forward.
What are the regulatory issues with accepting bitcoins in India? Do you see bitcoins ever being accepted as legal currency here?
Neither has the government formally brought bitcoin under the definition of currency, nor has it made it illegal. It’s fair to say that currently the cryptocurrency is neither illegal nor legal in India. The RBI has cautioned investors about the risks associated with cryptocurrencies. Unless the cryptocurrency is properly and comprehensively regulated and monitored by a robust institution, I don’t see bitcoin becoming a legal currency in India.
What risks and security concerns should investors be aware of when trading in bitcoins?
There are regulatory risks, scalability risks, risk of hacking, and extreme volatility. Bitcoin wallets are stored in computers or mobile devices; if those devices get stolen, you may permanently lose access to your holdings. Further, since it’s not regulated by authorities, you may not be able to report it either.
Do you see Ponzi schemes building up around bitcoin trading?
With the rise in demand for bitcoins in India, I certainly see various illicit schemes being set up. Investors must be aware of all the possibilities and risks, and verify the authenticity of the investments. You should know whom you are dealing with before handing over your money.
What’s your advice to investors in bitcoins and other cryptocurrency?
It is imperative for investors to comprehend the financial, legal, customer protection and security-related risks associated with bitcoin. It is the most volatile asset in the global market and it is highly speculative. You need to be prepared to lose everything you invest. Also, while it looks promising now, don’t count on the price to keep rising forever.