Friday, 10 February 2017

India's Central Bank Issues Warning About Virtual Currencies

After demonetisation, govt must prepare to fight challenge of digital black economy

source: http://indianexpress.com/article/opinion/web-edits/after-demonetisation-govt-must-prepare-to-fight-challenge-of-digital-black-economy-4444296/

One of the major issues that the government may turn its attention to is digital currency like bitcoin and its possible use to turn black money into digital black money.

The demonetisation exercise was carried out to wipe out black money from the system. But the black money hoarders seem to have found leaks in the system and they are making use of them to launder their money and hide their cash in fake bank accounts by misusing other banking channels. However, one of the major issues that the government may turn its attention to is digital currency like bitcoin and its possible use to turn black money into digital black money.
Bitcoin is a digital cryptocurrency that is computer generated and not printed or minted physically like a country’s currency. It is created and held electronically in a decentralised system meaning no single person, bank, authority has control over it. It works as conventional forms of currency and is traded worldwide as well.
What helps black money holders is that bitcoin accounts are completely anonymous and are only linked to bitcoin addresses that can’t be linked to your name, physical address or any sort of information that can give away your identity.
Ideally, it is supposed to be transparent with records of transactions kept, but in a huge decentralised network spread over the globe, the money is held in a network called a blockchain–a huge general ledger. The catch is that even if one has a publicly used bitcoin address, nobody can prove for sure that it’s yours, which makes it convenient for people to hide their money. Also, it isn’t difficult to own and operate multiple addresses when people are using hundreds of physical accounts to hide their money.

The common Indian may find it difficult to make the shift to the digital economy. Criminals, on the other hand, might shift their operations to digital currency creating a parallel digital black economy by possibly using something like bitcoin, which is virtually anonymous and almost impossible to trace its owner.
Deep web and darknet are terms alien to most Indians, even for many of the tech savvy individuals. Criminals openly make use of this anonymous network dealing in cryptocurrency like bitcoin, often for criminal purposes. Any manner of services can be found on the darknet available for payment in bitcoin. A few years ago, one of the most diverse drugs network called silk road was exposed which was using darknet and bitcoin.
Handling these challenges should be among the top priorities of the government. It should anticipate this rather than firefight this situation at a later stage. At least three major domestic bitcoin startups are already functioning in India and that number can go up substantially. Foreign-based bitcoin companies are  also available for access and negotiating with them is even more difficult.
A recent report by Forbes revealed that after demonetisation was announced, service oriented Zebpay witnessed an upsurge in interest. Indian bitcoin startup Unocoin saw a price hike of about 20 percent while BTCXIndia saw a spike of as much as 40 per cent.
After demonetisation was announced on November 8, Forbes revealed that 60 per cent of another Bitcoin company Bitwage’s Indian customers burst to use their services in mid November. The black wealth grows like stocks using cryptocurrency as well. After 18 days of demonetisation, the price of one bitcoin on Zebpay increased from ₹51,600 to ₹69,500.
RBI and other authorities are nowhere near prepared to handle such a challenge and the need of the hour is to make sure that they prepare in time as people who have a lot of money, especially black money, are also clever enough to find ways to hide it. The government needs to stay a step ahead at all times instead of being caught off guard.

********

India's Central Bank Issues Warning About Virtual Currencies 

source:

http://www.investopedia.com/news/indias-central-bank-issues-warning-about-virtual-currencies/ 

By Prableen Bajpai, CFA (ICFAI) | February 3, 2017 — 2:04 PM EST  

 

India’s apex bank, the Reserve Bank of India (RBI), has issued an advisory cautioning users, holders and traders of virtual currencies (VCs) such as bitcoin​ about the risks involved.
The note published by the central bank stated, “The Reserve Bank of India advises that it has not given any license /authorization to any entity / company to operate such schemes or deal with bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with virtual currencies will be doing so at their own risk.” (See also: Bitcoin Predictions for 2017)

Virtual Currency Risks

This is not the first time that RBI has issued such warnings about VCs. Back in December 2013, it had sent out a similar and more elaborate note.
The 2013 note mentioned the following risks:
  1. Since there is no central agency regulating virtual currencies, the loss of an e-wallet to hacking or malware attacks could result in a permanent loss of the currency stored in it.
  2. Payments take place peer-to-peer without a framework for recourse or an arbiter incase of a dispute. VCs see high volatility and their value is a matter of speculation.
  3. The legal status of some exchanges is not clear, exposing traders to legal and financial risks.
  4. People can unknowingly be breaking anti-money laundering and promoting terrorism since identities in a peer-to-peer system are hidden.
This latest warning comes at a time when bitcoin in India has garnered significant interest among investors and users, especially since the demonetization of high denomination notes. The rising popularity of bitcoin in India has probably triggered the unfortunate rise of Ponzi​ and MLM schemes. (See also: Beware of these Five Bitcoin Scams)
Sandeep Goenka, the co-founder of Zebpay, feels that RBI's statement is not targeted at exchanges which follow Anti Money Laundering (AML) guidelines, maintain a full record of client details such as PAN card, bank account and only allow trades via bank transfers. He said, “I don’t believe it has anything to do with virtual currency exchanges like ours as we are all directly in touch with them. Regulating bitcoins and virtual currencies shall help India in a bigger way by helping to create financial infrastructure of the future, making micro remittances cheaper, making record-keeping easier and avoiding counterfeiting of currency. As per some of the top law firms in India, bitcoin is legal as per existing laws. It would greatly help if RBI clarifies its requirements so we can ensure that we comply with all legal requirements.”

No Regulatory Framework

The conclusion on the 2013 note read, “RBI is presently examining the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.” However, no formal guidelines for operators and users of bitcoin have been issued ever since. Bitcoin exchanges on their own part have tried to ensure that AML guidelines are followed and they are tax compliant. (See also: India: Migration, Remittance & Bitcoin)
When asked about bitcoins, Raghuram Rajan, the RBI governor at the time, had said, “I have no doubt that down the line, we will be moving towards a primarily cashless society...and we will have some kinds of currencies like this (bitcoin) which will be at work.” He further added, “I think these virtual currencies will certainly get much better, much safer and over time will be the form of transaction, that’s for sure.”
Interestingly, RBI has been exploring bitcoin’s underlying technology – the blockchain​. In January 2017, RBI’s Institute for Development and Research in Banking Technology (IDRBT) issued a white paper on applications of the blockchain technology to banking and financial sector in India. India’s private sector banks ICICI and Axis bank have shown great interest in bitcoin’s underlying technology and have even completed successful trials on it.

The Bottom Line

It’s close to four years since RBI first mentioned virtual currencies in its June 2013 report on Financial Sector Regulation and Infrastructure. A lot has changed since then in terms of user base, trading volumes, mainstream media coverage and awareness about VCs. Perhaps it’s time that RBI formally frames a regulatory structure around VCs such as bitcoin to, give entities involved more clarity and allow a revolutionary technology to grow to its full potential.
India’s apex bank, the Reserve Bank of India (RBI), has issued an advisory cautioning users, holders and traders of virtual currencies (VCs) such as bitcoin​ about the risks involved.
The note published by the central bank stated, “The Reserve Bank of India advises that it has not given any license /authorization to any entity / company to operate such schemes or deal with bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with virtual currencies will be doing so at their own risk.” (See also: Bitcoin Predictions for 2017)

Virtual Currency Risks

This is not the first time that RBI has issued such warnings about VCs. Back in December 2013, it had sent out a similar and more elaborate note.
The 2013 note mentioned the following risks:
  1. Since there is no central agency regulating virtual currencies, the loss of an e-wallet to hacking or malware attacks could result in a permanent loss of the currency stored in it.
  2. Payments take place peer-to-peer without a framework for recourse or an arbiter incase of a dispute. VCs see high volatility and their value is a matter of speculation.
  3. The legal status of some exchanges is not clear, exposing traders to legal and financial risks.
  4. People can unknowingly be breaking anti-money laundering and promoting terrorism since identities in a peer-to-peer system are hidden.
This latest warning comes at a time when bitcoin in India has garnered significant interest among investors and users, especially since the demonetization of high denomination notes. The rising popularity of bitcoin in India has probably triggered the unfortunate rise of Ponzi​ and MLM schemes. (See also: Beware of these Five Bitcoin Scams)
Sandeep Goenka, the co-founder of Zebpay, feels that RBI's statement is not targeted at exchanges which follow Anti Money Laundering (AML) guidelines, maintain a full record of client details such as PAN card, bank account and only allow trades via bank transfers. He said, “I don’t believe it has anything to do with virtual currency exchanges like ours as we are all directly in touch with them. Regulating bitcoins and virtual currencies shall help India in a bigger way by helping to create financial infrastructure of the future, making micro remittances cheaper, making record-keeping easier and avoiding counterfeiting of currency. As per some of the top law firms in India, bitcoin is legal as per existing laws. It would greatly help if RBI clarifies its requirements so we can ensure that we comply with all legal requirements.”

No Regulatory Framework

The conclusion on the 2013 note read, “RBI is presently examining the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.” However, no formal guidelines for operators and users of bitcoin have been issued ever since. Bitcoin exchanges on their own part have tried to ensure that AML guidelines are followed and they are tax compliant. (See also: India: Migration, Remittance & Bitcoin)
When asked about bitcoins, Raghuram Rajan, the RBI governor at the time, had said, “I have no doubt that down the line, we will be moving towards a primarily cashless society...and we will have some kinds of currencies like this (bitcoin) which will be at work.” He further added, “I think these virtual currencies will certainly get much better, much safer and over time will be the form of transaction, that’s for sure.”
Interestingly, RBI has been exploring bitcoin’s underlying technology – the blockchain​. In January 2017, RBI’s Institute for Development and Research in Banking Technology (IDRBT) issued a white paper on applications of the blockchain technology to banking and financial sector in India. India’s private sector banks ICICI and Axis bank have shown great interest in bitcoin’s underlying technology and have even completed successful trials on it.

The Bottom Line

It’s close to four years since RBI first mentioned virtual currencies in its June 2013 report on Financial Sector Regulation and Infrastructure. A lot has changed since then in terms of user base, trading volumes, mainstream media coverage and awareness about VCs. Perhaps it’s time that RBI formally frames a regulatory structure around VCs such as bitcoin to, give entities involved more clarity and allow a revolutionary technology to grow to its full potential.

*********** 

Bitcoins may gain ground as govt fights black money 

http://www.hindustantimes.com/business-news/bitcoins-may-gain-ground-as-govt-fights-black-money/story-8eVzxnr2jGqAog7iZkP1YP.html

Those who possess bitcoins in India feel the government’s drive against black money will help the paperless, bank-less, and state-less currency gain ground.
Queries for bitcoins have gone up by 20% to 30% in the past couple of days, according to ZebPay, the largest trader of the digital currency in the country, which is adding 25,000 new bitcoin customers every month.
ZebPay already has 200,000 of the 400,000 odd bitcoin owners in the country. “People who never talked about bitcoins called me. Financial companies also want to invest in bitcoins ... that’s a big change in a country where bitcoins have not taken off,” said Saurabh Agrawal, CEO of the company.
Bitcoins are a digital currency, made by computers, whose prices are validated through a public ledger. Many in the US, UK and China invest in bitcoins to hedge against the share market risk. This money can, like any digital money, be used to pay for goods and services, such as buying coffee, a meal at a restaurant or even clothes.

Though not many merchants are accepting bitcoins in India, wallet holders (like a ZebPay customer) can buy Amazon or MakeMyTrip vouchers, or pay bills with the money.
In Unocoin, 2,000 merchants and vendors are accepting bitcoins. Sapna Book House, India’s largest bookstore chain before Amazon set up shop here, also accepts bitcoins. “People are getting remittances in bitcoins, instead of Paypal. They are able to liquidate them by paying just 1% transaction fee,” said Sathvik Vishwanath, CEO and co-founder, Unocoin.
He is also coming out with point-of-sale app to accept bitcoins. However, few are making transactions with the new form of digital money. “People are just buying it and holding on to it … if they want to sell, they deposit the coins in their Unocoin wallet, and the money is transferred to their bank account in two hours,” said Vishwanath.
As queries from India grew, the prices surged – bitcoins were 8% costlier than in the US. That is also because not many are developed in India. The market is also small – India does business of ₹5 crore every day (China ₹10,000 crore, the US ₹2,000 crore).
Agrawal hopes there will now be a surge in demand. “Only when something like this happens (currency notes removed), the millennials think digital asset is the future.”

Are crypto-currencies worth your while?

http://www.livemint.com/Money/CE7prSpzYoTrHRHlN2BV6H/Are-cryptocurrencies-worth-your-while.html

Mon, Sep 26 2016

While the number of companies related to crypto currencies has increased to 20 from just four, usage in India is limited, and mostly only in bitcoins.

The Reserve Bank of India (RBI) has mostly been silent on the regulations related to crypto-currencies such as bitcoins, other than sending out a cautionary message in 2013. But that has not restricted the use of crypto-currencies in India.
This is evident from the number of companies that have been launched in the last 3 years, allowing individuals to buy and sell crypto currencies. According to Tracxn, which provides financial information on start-ups: from four such companies in 2013, there are almost 20 in India now.
Three companies have already got funding of over $2 million. Most only focus on bitcoins. Some also transact in the other crypto-currencies. Mint Money looks at these companies and the services that they provide.

What is a crypto-currency?

A crypto-currency is a digital currency created through encryption techniques. Bitcoin is the most famous. Some others are: litecoin, peercoin, namecoin, ether and primecoin. In India, most companies are associated with bitcoins.
Different kinds of businesses have also sprung up around bitcoins, including: exchanges, portfolio management, technology solutions, trading platforms and bitcoin mining. “Indians are using bitcoins to trade, make payments for overseas transactions and to convert into Indian currency,” said Mohit Kalra, chief executive officer and founder, Coinsecure, a Delhi-based bitcoin exchange and trading platform.


 

How to buy bitcoins

Mint Money doesn’t recommend buying bitcoins, but if you want to, this is the process.
First, you need to register with the website or app where you plan to buy. We picked one of the exchanges. As part of the registration process, you will have to enter your user name, email, password and accept the terms and conditions.
You can also download an app to buy bitcoins. In the app, once you verify your mobile number, you can set a four-digit personal identification number (PIN). Next, enter your name and email. And then complete the verification process with your Personal Account Number (PAN) and bank details. Once your account is verified, you can start buying and selling.
There are transaction limits—minimum Rs 500 and maximum Rs 5 lakh. To pay, you have to use Net banking. You can send money using national electronic funds transfer (NEFT), real-time gross settlement (RTGS) and immediate payment service (IMPS). After you send the amount, your transaction will be verified and you will get a completion alert.

How to trade bitcoins

Currently, there are four bitcoin exchanges in India: Coinsecure, Zebpay, Unocoin and BTCX India. Like any other currency exchange, the value of the crypto-currency is affected by factors such as news or policy changes. Each exchange disclosed the market price on its website. For instance, on 22 September, the buy price of one bitcoin was Rs41,223 at Coinsecure, Rs42,247 at Unocoin, Rs42,117 at BTCXIndia and Rs41,472 at Zebpay. The sell price is usually lower, by Rs200-2,000. The transaction attracts a fee of 0.3-1.15% of the amount. To buy or sell a bitcoin from a website, you need to sign up with one of the companies. You also need to have a bitcoin wallet. Companies may ask you to go through a know-your-customer (KYC) process, where you need to provide PAN, mobile number and account details. You may not be able to transact using a third-party bank account.
“We align with AML (anti-money laundering) policies because of which our KYC and verification process allows our users to safely use bitcoin within set limits,” said Vikram Nikkam, founder and bitcoin analyst, Trybicoin.in, an online platform to sell and buy bitcoins.

How to use bitcoins

Some merchants have started accepting bitcoins as a mode of payment. “In 2013, no merchant establishment accepted bitcoins in India. Now, merchants and e-commerce portals have started accepting. You can use bitcoins for mobile recharge, to buy Flipkart vouchers, movie tickets and pay utility bills,” said Rao. Utility bill payments such as mobile bill are still being processed. “We convert bitcoins into rupees on behalf of the bitcoin user and pay to the respective billers. So, we actually end up buying bitcoins and there is no partnership with the billers or e-commerce companies,” said Sandeep Goenka, co-founder, Zebpay, an app-enabled bitcoin exchange. Mint, however, couldn’t independently verify this with retailers or billers.
“You can buy and sell bitcoins using bank transfers, Paytm, Paypal, direct deposit and ATMs and also through direct delivery (currently in Bengaluru only),” said Nikkam. Paytm declined to comment.
Unocoin, a bitcoin trading platform, mentions on its website that it allows transactions on MobiKwik. However, MobiKwik denied this claim. “We were in talks with Unocoin, but the partnership never went through. We don’t accept transactions using Bitcoins in our wallets,” said Mrinal Sinha, chief operating officer, MobiKwik.
In tomorrow’s issue, read more about regulations, taxation and fraud in crypto-currencies.

 **********

India: Migration, Remittance & Bitcoin

By Prableen Bajpai, CFA (ICFAI) | Updated September 28, 2016

At the time when bitcoin is rising on the popularity charts in India, Coinsecure and OKCoin have entered into a partnership to enable remittances into India via the blockchain technology. Bitcoin’s underlying technology – the blockchain is the buzz word in the financial technology space. The benefits offered by blockchain are too fascinating to ignore, which have made it the most talked about, researched and experimented financial technology in the present times.
A blockchain is a public ledger of all transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order through cryptography, ensuring that they remain meddle-proof. The blockchain thus stands as a tamper-proof record of all transactions on the network, distributed to all participants. It has to the potential to reduce costs for international payment transfers by one-third while accelerating the speed of such transactions.
The services will soon be available on Coinsecure’s website and mobile application. As per Coinsecure, “We aim to provide the lowest fee in the industry and with a proof of work over the blockchain network. This will drop fees from the traditional 3-5% to only 0.5%.”
Coinsecure is among the prominent bitcoin exchanges in India. It was founded by Mohit Kalra and Benson Samuel in mid-2014 while its Bitcoin exchange was launched on January 1, 2015. OKLink (network created by OKCoin) is a blockchain money transfer network that gives every remittance and payment company the same cost advantage, global reach, and speed of Western Union. Launched in August 2016, OKLink is growing rapidly and currently offers payouts in five countries, at over 100,000+ locations.
Coinsecure Co-Founder and CEO, Mohit Kalra stated, “Remittance will work over the network created by OKCoin called OKLink. It will enable Indian citizens to send or receive funds either in bitcoin or Indian Rupees from countries around the globe such as China, Hong Kong, Korea, Canada, Philippines and many more.”
“Coinsecure is the leading blockchain company in India and their commitment to our network is further validation for us and our shared vision of leveraging the trust of the blockchain to improve the end remittance experience for the Indian people” said Jack C. Liu, Chief Strategy Officer, OKLink.

Migrants, Remittances & Bitcoin

Millions of migrants around the world send huge amounts in remittances each year to their countries of origin. In developing countries such as India, remittances are an important source of family as well as national income and a sound foreign exchange generator. A World Bank report highlights that, Remittances are better targeted at the needs of the poor than foreign aid or foreign direct investment (FDI), as recipients often depend on remittances to cover daily living expenses, to provide a cushion against emergencies, or to make small investments in business or education. Therefore, remittance services should be safe, efficient, and reliable.”
India has the second largest diaspora in the world, with around 25 million people living across 110 countries, as per the figures by the Ministry of External Affairs. With such a large overseas population, the inflow of strong remittances is understandable. According to a release by the World Bank, “Officially recorded remittances to developing countries amounted to $431.6 billion in 2015, an increase of 0.4% over $430 billion in 2014. India retained its top spot in 2015, attracting about $69 billion in remittances, followed by China with $64 billion, the Philippines ($28 billion), Mexico ($25 billion), and Nigeria ($21 billion).”
Other bitcoin exchanges in India such as Zebpay, Unocoin and BTXCIndia are witnessing the growing inquiry and interest of people to use bitcoin and blockchain as a viable solution to send money home. Sandeep Goenka, Co-founder, Zebpay believes that, “Bitcoin has the potential to save India $7 billion a year in fees charged by American companies like PayPal and Western Union. But more importantly this money goes in the pockets of families which need this money the most.”
The huge cost advantage and speed factor that a bitcoin remittance gateway offers is bound to see more and more Indian’s looking to process their remittances through bitcoin which would be a big boost to people’s familiarity, engagement and usage of bitcoins in India. (Related reading, see: Blockchain: The Backbone of Finance's Entire Future)

Blockchain: The Backbone of Finance's Entire Future 

By Prableen Bajpai, CFA (ICFAI) | February 1, 2016  

link: http://www.investopedia.com/articles/investing/020116/blockchain-backbone-finances-entire-future.asp

People are less excited about bitcoin now--and yet, Blockchain is all over the media these days. JP Morgan Inc (JPM) just announced they are trying out a new blockchain product. Introduced by the first cryptocurrency, bitcoin​, blockchain is the technology that seamlessly runs the digital currency. Although bitcoin is now seven years old, blockchain shot into the spotlight only in the last year or so. Today, it is the buzz word in the financial world, fast gaining prominence outside it as well as within different industries and even governments that are looking to capitalize on this innovative technology. (For related reading, see: The Future of Cryptocurrency.)

Blockchain Basics

So, what exactly is a blockchain? A blockchain is a public ledger of all transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order through cryptography, ensuring that they remain meddle-proof. The blockchain thus stands as a tamper-proof record of all transactions on the network, distributed to all participants.
Thus the validation of any recording on the blockchain isn’t centralized, eliminating the need of a third-party to an intermediate. To put it to better use, these distributed ledgers can be open or permissioned, or restricted or unpermissioned, in terms of the number of people who can access the information. There is an irrevocable trail of all the transactions that have ever been made, which makes attempts of hacking or fraud unsuccessful. Thus, blockchain offers a chance to work at lower costs with greater regulatory compliance, reduced risk and enhanced efficiency. According to a survey report by the World Economic Forum, “10% of global gross domestic product [will be] stored on blockchain technology by 2025.”
According to a Deloitte report, a blockchain is “a technology that allows people who don’t know each other to trust a shared record of events. This shared record, or ledger, is distributed to all participants in a network who use their computers to validate transactions and thus remove the need for a third party to intermediate.”

Blockchain Benefits

Banks have been among the first to look at the benefits of the cost advantages and efficiency that this technology offers them. According to Santander InnoVentures, “distributed ledger technology could reduce banks’ infrastructure costs attributable to cross-border payments, securities trading and regulatory compliance by between $15 – 20 billion per annum by 2022.” It's no wonder banks are “openly and secretly” working in their own innovation labs to explore the technology. In fact, as many as 40 banks from across the globe have joined an R3 CEV consortium working on the distributed ledger technology. On January 20, R3 CEV announced, “the successful completion of a groundbreaking distributed ledger experiment involving 11 of the world’s largest financial institutions.” (For more, see: Blockchain Technology to Revolutionize Traditional Banking.)
Blockchain technology can also help shorten the time involved in trade settlement. The current system involves T+3 days (stocks, corporate bonds, municipal securities and mutual funds shares) while a few require T+2 (foreign exchange settlements) or T+1 (treasury bonds) days. Institutions have been working on methods to condense the time consumed in the process and hence decrease counter-party risk. Blockchain-based smart contracts are being experimented with to provide a solution. Goldman Sachs (GS) has filed a patent application for a “cryptographic currency protocol”-based settlement system for the securities market. Additionally, the technology is being tested to improve transparency and functioning of back-office for securities. Recently, NASDAQ used its Nasdaq Linq blockchain-enabled technology to document the issuance of shares of Chain.com (the inaugural Linq client and its blockchain developer) to a private investor.
Blockchain technology can also be put to great use in the insurance sector, which needs to maintain gigantic records of premiums, claims and payments. The industry faces great threat from fraud, such as “crash for cash.” According to the Insurance Fraud Bureau in the U.K., “Costing around £400m a year, ‘Crash for Cash’ scams are run by fraudsters who manufacture collisions, sometimes with innocent road users, hoping to profit from fraudulent insurance claims. With claims from a single collision potentially worth tens of thousands of pounds, organized fraudsters are orchestrating scams that involve multiple collisions and can be worth millions of pounds.”

Blockchain and Business

The public sector is another area where blockchain has potential use. It can help to make the public sector service more efficient by plugging the loopholes; matters such as citizen identity, vehicle registry, pensions, tax payments, patents and asset (real estate) can be registered on the blockchain. Additionally, industries such as media, diamond, music and healthcare have already started tapping blockchain technology.
According to the World Diamond Council, “An estimated $13 billion worth of rough diamonds are produced per year, of which approximately $8.5 billion are from Africa (approximately 65%). Global diamond jewelry sales continue to grow, increasing three-fold in the past 25 years, and are currently worth in excess of $72 billion every year.” Despite certain mechanisms in place, the industry faces unique problems like insurance fraud and tracking the origin of diamonds; it has struggled to track and check the entry of “blood” diamonds from entering the legitimate supply chain of diamonds. (For more, see: 5 Ways to Invest in the Blockchain Boom.)
Everledger is using blockchain technology as a solution to these problems. Everledger defines themselves as a “fraud detection system, overlaying big data from closed sources like insurers ad law enforcement.” Companies like PeerTracks, Bittunes and Ujo Music have been working to bring the blockchain technology to the music industry. According to a recent announcement PeerTracks has collaborated with MUSE, a blockchain specially tailored for the music industry in association with OpenLedger and Danish bitcoin exchange CCEDK, to resolve the problem of monetizing music in an easy and convenient way.

The Bottom Line

Although the blockchain technology is just making its debut in many spheres of business and industry, there are signs that it is here to stay. This technology, which is the backbone of bitcoin and other virtual currencies, is being endorsed and praised by prominent institutions from the International Monetary Fund (IMF) to government advisory bodies.
A recent report by the U.K. government states, “Distributed ledger technology is already having a profound impact on how private companies manage data and interact with customers and suppliers. If applied within government it could reduce costs, increase transparency, improve citizens’ financial inclusion and promote innovation and economic growth.”

Press Releases

RBI cautions users of Virtual Currencies against Risks

The Reserve Bank of India has today cautioned the users, holders and traders of Virtual currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.
The Reserve Bank has mentioned that it has been looking at the developments relating to certain electronic records claimed to be “Decentralised Digital Currency” or “Virtual Currency” (VCs), such as, Bitcoins, litecoins, bbqcoins, dogecoins etc., their usage or trading in the country and the various media reports in this regard.
The creation, trading or usage of VCs including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities. As such, they may pose several risks to their users, including the following:
  • VCs being in digital form are stored in digital/electronic media that are called electronic wallets. Therefore, they are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack etc. Since they are not created by or traded through any authorised central registry or agency, the loss of the e-wallet could result in the permanent loss of the VCs held in them.
  • Payments by VCs, such as Bitcoins, take place on a peer-to-peer basis without an authorised central agency which regulates such payments. As such, there is no established framework for recourse to customer problems / disputes / charge backs etc.
  • There is no underlying or backing of any asset for VCs. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value.
  • It is reported that VCs, such as Bitcoins, are being traded on exchange platforms set up in various jurisdictions whose legal status is also unclear. Hence, the traders of VCs on such platforms are exposed to legal as well as financial risks.
  • There have been several media reports of the usage of VCs, including Bitcoins, for illicit and illegal activities in several jurisdictions. The absence of information of counterparties in such peer-to-peer anonymous/ pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.
The Reserve Bank has also stated that it is presently examining the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.
Ajit Prasad
Assistant General Manager
Press Release : 2013-2014/1261 

source: https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247

 

 ************

No comments:

Post a Comment

Wildlife Sanctuaries in News