Rahul first heard of the virtual currency called bitcoin four years ago while playing multi-player online games. “There was an option to buy lives and resurrect your character so I traded my bitcoin stash,” says Rahul, who goes by just his first name. One life for 500 bits (one bit is one millionth of a bitcoin) was not a bad deal at all. But as he recounts that story now sitting in a cafe in Delhi, the 32-year-old says, “I regret it. I regret it so much. I should have saved those.” Had he held on, he could have been a millionaire today.
The cryptocurrency’s value has skyrocketed – from $13 for one bitcoin (denoted with BTC) in January 2013 to $1,182 (Rs 76,000 approx) now. Rahul, a data analysis consultant in Delhi, has since invested in the cryptocurrency though his family back in Muzaffarpur, Bihar, is mystified by his move. “When I told my brother about it, he asked me, ‘Iska maalik kaun hai?’ (Who owns it?) I told him, no one does. Everyone does. He wasn’t convinced. The functioning is difficult to understand for a layperson,” says Rahul.
Bitcoins can be bought or mined (discovering new ones) but the latter requires high-end computing power and lots of time. Depending on the kind of hardware one uses, one can currently mine up to 0.1 BTC per month. “That is neither profitable not practical,” says Rahul, who, like many others, buys them off an exchange. The “investment” works much like it would with gold or other currencies — buy, wait for value to appreciate, sell.
Sahil Bansal (name changed on request), a business analyst based in Noida, is also among the small but growing tribe of Indian “bitcoiners”. “I have never used it for transactions. I only keep it as an asset,” says Bansal, who bought Rs 50,000 worth last year after a friend told him about it. Today, he can make over Rs 75,000 if he sells but he wants to hold on till the government takes a decision on how it wants to treat the cryptocurrency.
On Wednesday, the Union ministry of finance set up an inter-disciplinary committee that will look at global regulatory frameworks for Bitcoin, and suggest measures to deal with the same in India.The committee will submit a report in three months. The move is significant considering that Japan has legalised it as a payment method.
In India, one can buy bitcoins through a Bitcoin exchange or directly from an individual. Saurabh Agarwal, 41, co-founder and CEO of Indian Bitcoin exchange Zebpay, says very few exchange them for goods and services in the physical world. “Like gold, Indians believe then to be an asset class and its actual use case is only 1% of total transaction value. We believe that once Indian merchants get clarity on regulation and taxation of bitcoins, we will see them using it as a payment gateway,” says Agarwal.
There are some who make money buying bitcoin off one exchange and selling it on another. Benson Samuel, CTO and founder of exchange Coinsecure, says he has seen people indulge in this arbitrage. “One lady used to buy from our exchange, and within a few hours, sell it on another. That works because different exchanges have different prices,” he says. Given the high value, it is more common to deal in fractions of bitcoin. “You can trade for as low as 0.01 BTC on Coinsecure,” says Samuel, who started his exchange in 2014.
Techies and traders are among the most common users of bitcoins, he says. What makes the currency attractive is that it can be used to move money across the globe quickly and anonymously, and that it is free of control from any central bank or government.
Hence, its association with the illegal drug trade. Just last month in India, two college students from Mumbai were arrested for possession of LSD, a psychedelic drug. They bought it online, paying for it in the cryptocurrency.
Despite it all, Rahul is idealistic about what the currency can do. “The government has to try it at least once. You can’t track cash like you can track bitcoin,” he says. The blockchain technology that underlies Bitcoin, makes sure that every transaction is traceable right up to the origin point. It is often described as a “decentralised ledger” that records every payment. Since this ledger is public, no intermediaries are required to authenticate transactions.
“This is the kind of transparency that is required. Just think of transactions for property — not even an inch of land can be bought illegally if this is used. I think the government should make regulations at some point. It is when bitcoins are converted into rupees that regulation will be required. Bitcoin to bitcoin transactions are transparent and trackable,” says Rahul.