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‘Bitcoin too small in India to be regulated’
Context
Bitcoins and other cryptocurrencies will see increasing use in India, according to industry players, who say that, right now, the sector is too small to be regulated by the Reserve Bank of India (RBI) or Finance Ministry
Price volatility
Bitcoin companies also say that volatility in the cryptocurrency’s price is likely to continue since it is still attracting new investors with inadequate knowledge about the market, with speculation separately fueling the price fluctuations
Why there has been a sudden surge in fluctuations?
- It is because some countries have legalised cryptocurrencies like Japan and Korea, and in the U.S. they have announced that there will be bitcoin futures trading. So, this not only gives a legal standing to it, it also opens the door to speculation
- Also, people are seeing others put in ₹1 lakh and making 10% the very next day, so that is also bringing a lot of laymen into this, which may or may not be a good thing
- Another reason for the price volatility, something that will continue for some time, is the disaggregated nature of the bitcoin market
RBI’s caution
RBI has cautioned against its use, informing users, holders, investors and traders dealing with virtual currencies that they are doing so at their own risk
SEBI’s views
Securities and Exchange Board of India Chairman Ajay Tyagi recently said the cryptocurrency had so far not posed any systemic risk. He added that the government had formed a panel to examine it
What should government do if it wants to regulate bitcoin?
If government wants to then what it can do based on the best practices abroad, is to regulate the exchanges. These exchanges need to be regulated heavily, with proper audits, KYCs checks, limits on customers
- Audit data: Data from these audits could then be used to develop a licensing system for firms that want to use bitcoins
