Investing in Bitcoins in India

Last Updated at: Oct 27, 2020
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Possibly the greatest revolution in the financial industry, Bitcoin has shaken the fin-tech sector since it was opened for investment in 2013. With annual growth rates of 400-700 percent, Bitcoins definitely seem like a glitzy investment. Though it is said that the founder of bitcoins remains unknown, we will make it known through this article, the methods, the advantages and the risks associated with investing in Bitcoins.

Why invest in Bitcoins?
When we already have stock exchanges, mutual funds, land, property, and gold, why was there a hype around investing in Bitcoins? The answer lies in the growth rate it offered, that grew by leaps and bounds in a very short time. If you’d purchased bitcoin of worth 1000$ in 2013, the value last year of the same number of bitcoins would’ve been 16,000$. However, back then no one could’ve predicted that bitcoins would witness such elephantine growth.

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Bitcoins- is it just regular currency?
The answer is a yes and a no. It is regular currency as it can be converted into one’s domestic currency like rupee at the prevailing rate, and it is increasingly becoming an internationally accepted medium of exchange that is not controlled by any country or government and hence, unaffected by inflation. However, it differs from conventional currency as governments may choose to ban it and it may not even be accepted as a mode of payment in some jurisdictions. The process of bitcoin issuing is also complex. There are only a limited number of bitcoins available and they are created through a process called bitcoin mining – which is a very specific research process involving complicated algorithms and huge costs.

How does one invest in bitcoins and other forms of cryptocurrency?
There are several types of cryptocurrencies available these days such as Ethereum, Ripple, Litecoin etc. These are listed on cryptocurrency websites and apps. A user can download one of these apps and begin a registration process that includes KYC through Aadhar card/Passport. Once that’s verified, a user may get a dashboard that indicates prices, volumes, and trends of all the currencies including bitcoin listed on it.

A new ATM in Bengaluru’s Kemp Fort Mall inaugurated on October 15, 2018 has become the first Bitcoin ATM to be launched in India by the international player Unocoin. Meant exclusively for its customers, buyers can deposit cash or withdraw money which can then be used on Unocoins website or mobile app.

Has RBI banned bitcoins?
No, it has merely issued a precautionary warning that investors need to be aware of the risks. It has however barred banks from associating themselves from cryptocurrency in any form. The current government has not added bitcoins to what it deems as a valid legal currency, however since it is not illegal, investors can continue to purchase bitcoins, albeit with complete knowledge of the vulnerabilities.

The volatility of bitcoin that you we must know:
– Bitcoins at the end of the day are not government issued currency. This means that the bubble of growth may suddenly burst and there will be little saving grace as there are no assets backing up this value (there are divided opinions on whether the mining process can be called an asset).
-Another risk is that there is no redressal mechanism. If one is cheated in a bitcoin transaction, there is hardly a remedy available as Consumer courts, SEBI, NCLT and Civil Courts may not have the appropriate jurisdiction in these cases.

However, it has been speculated that SEBI plans to come out with a detailed set of guidelines on regulation of Bitcoins by the end of this year which is likely to enhance the investor confidence while making it easier to trade in cryptocurrencies.

Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.