Bitcoin Startups Fear No Ban in India, Say Technology Will Make Inroads

There seems to be a lot of controversy surrounding Bitcoin’s legality in India. The government and ministers are cautioning the users repeatedly gainst the risk involved with the usage of this digital currency.

The minister of state for finance, Arjun Ram Meghwal, last week reiterated concerns against the use of digital currencies in India.

"The absence of counter parties in usage of [virtual currencies] including bitcoins, for illicit and illegal activities in anonymous/ pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws," he said in a written reply to the Rajya Sabha.

Despite all the warnings, Bitcoin startups of India remain confident and feel largely insulated by the consequences of the risk involved with the cryptocurrency. Bitcoin startups such as SearchTrade, Zebpay, Unocoin and Coinsecure have taken a step forward to form the “Digital Asset and Blockchain Foundation of India (DABFI)” for the orderly and transparent growth of the virtual currency market.

Understand Legal And Value Discovery Process for Bitcoin:

Vishal Gupta, CEO, SearchTrade feels Bitcoins are a risky investment not withstanding government opinion or policies around it.

“One must understand both legal as well as value discovery process before jumping into investing in them. The government has not explicitly said it is illegal; my understanding is they insist it is illegal to indulge in illegal activities with them,” he explained.

Talking about the self – regulatory body formed by the Bitcoin start-ups, he said, “We are creating a self-regulatory framework due to lack of defined policies in the space to protect both consumers and businesses involved in the space. For e.g., we have made it mandatory for our members to implement KYC, anti-money-laundering and suspicious trade reporting in their day to day operations. We are working on many such initiatives to help the budding ecosystem.”

In addition, at DABFI Vikas along with other members are engaging with various government departments to help them better understand the technology and frame policies for the future.

Bitcoin Investment Faces Both Technical And Legal Risks:

Another bitcoin exchange company, Zebpay buys and sells bitcoins in India.

Sandeep Goenka, COO and Co-founder, ZebPay believes that investing in bitcoin is high reward, high risk.

“Bitcoin has been the best performing currency for a year since its inception except 2014. However, the investment faces both technical and legal risks. Hence even if you consider it, it should be a very small part of your portfolio,” he said.

According to Sandeep, bitcoin is legal under all existing laws. If it is banned in future, his company will stop operations. However, he added that it needs to be understood that the ban won't stop cryptocurrencies. It'll only stop its legitimate use.

Referring to the Indian governments’ strong stance towards the bitcoin usage, he said “They have genuine concerns like for any new technology, whether it’s a taxi hailing app, drones, health tech or cryptocurrencies. However, legitimate exchanges give them radar to the industry. If they ban us, international apps will continue to serve the underground market. All this will achieve is stopping legitimate use and Indian companies.

Bitcoin Will Always Face Legality Issues:

According to Mohit Kalra, CEO and Founder of Delhi-based bitcoin startup Coinsecure, something so decentralized and disruptive like bitcoin will always face issues regarding legality. Even for semi-decentralised cab systems like Uber and Ola Cabs, it took a lot of years for the regulators to come out with proper regulations. This delay definitely not means it was illegal to operate such services.

“We are seeing a similar trend with bitcoin, there are different opinions currently. Making bitcoin illegal will force exchanges like ours to shut down, thus promoting users to trade in cash illegal market. Doing so will be the complete opposite and against to what government expected after demonetisation,” he said.

While there’s global uncertainty over the legal status of bitcoin in India, Mohit further explained that a ban on something so decentralized will only force all the users to trade illegally. It will only result in government not getting any service tax from the companies or income tax from the users on what they earn from trading or mining.