Will bitcoins help Modi government realise its less-cash dream?

Praveen Shekhar
Praveen ShekharDec 20, 2016 | 08:01

Will bitcoins help Modi government realise its less-cash dream?

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.

Demonetisation of the old Rs 500 and Rs 1,000 notes has been received with mixed reactions. Despite the increase in digital transactions, we still see queues outside ATMs and banks. Largescale digitisation is the backbone of the digital economy. Due to our infrastructural limitations, there will be challenges in achieving that "less-cash" dream we keep hearing about.

While the fight between digital currency and physical currency rages on, there is another kind of currency that is slowly but surely gaining prominence in the Indian construct - cryptocurrency or bitcoins.

Since Prime Minister Narendra Modi pulled Rs 500 and Rs 1,000 notes from circulation on November 8 in a bid to fight corruption and terrorism, the weekly volume of bitcoin trading in India has nearly doubled.

The increased trading has helped push the digital currency’s value to recent highs. On December 9, the bitcoin neared one its highest values since February 2014. It surpassed $769.30 — just short of June’s $781.31, the bitcoin’s highest value this year.

India’s leading bitcoin company Unocoin says the average number of visitors to its site has crossed 14,000 from its daily average of 4,000 users before demonetisation.

Due to our infrastructural limitations, there will be challenges in achieving that "less-cash" dream we keep hearing about. Credit: Reuters

Zebpay, a local bitcoin company, has seen trade worth Rs 75 crore in November 2016 alone, compared to a trade of Rs 100 crore in all of 2015.

Queries for bitcoins have gone up by 20 to 30 per cent 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 2,00,000 of the 4,00,000-odd bitcoin owners in the country.

What is bitcoin?

- Bitcoin is a digital currency that is not supported by any country’s government or central bank.

- It is made by computers, whose prices are validated through a public ledger.

- Also known as cryptocurrency, this money can, like digital money, be used to pay for goods and services, such as buying coffee, a meal at a restaurant or even clothes who accept bitcoins as payment.

- Many in the US, UK and China invest in bitcoins to hedge against the share market risk.

Unocoin, an Indian bitcoin start-up is the first company in the country to offer a full-featured mobile bitcoin app. This includes 24/7 access to real-time bitcoin market prices and instantaneous trading transactions.

Unocoin, has unveiled a new app for Apple’s mobile operating system iOS and Google’s Android platform.

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. According to the firm, the app will allow consumers to buy, sell, send, receive and store bitcoins, all in one place, from any remote device.

Unocoin said the implementation is timely because bitcoin adoption is rapidly ascending in India, coupled with the government’s decision to demonetise Rs 500 and Rs 1,000 notes.

Experts say the demand for bitcoins will increase as there are more than one billion Indians using mobile phones. More than 300 million Indians use their phones regularly for accessing the Internet.

In the world’s largest remittance market, bitcoin is appealing because of how cheap and efficient it is — credit card transaction fees are nearly 10 times more than bitcoin transactions. More merchants have also started accepting bitcoin payments since the asset can be liquidated with a small transaction fee of one per cent.

This year, the bitcoin has emerged as a better bet than every major foreign-exchange trade, stock index and commodity contract. The electronic coin that trades and is regulated like oil and gold surged 79 per cent since the start of 2016 to $778, its highest level since early 2014, according to data compiled by Bloomberg — that's four times the gains posted by Russia's ruble and Brazil's real, the top two hard currencies of the world.

After it was created in 2008, the bitcoin was hailed as the next big thing in foreign exchange markets and an obvious monetary evolution in an increasingly digital world. But by 2014, its value tumbled 58 per cent as governments cracked down on its use and a major exchange lost account-holders' funds.

The rationale behind the bitcoin's lows and highs is difficult to pinpoint. There is a number of reasons the hard-to-track currency is staging a comeback now, from capital controls in places like China to isolationist rumblings in the UK and US as well as - bitcoin supporters say - owing to increased adoption by companies and consumers.

Last updated: December 20, 2016 | 08:01
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