Laxmicoin, modelled as an Indian version of virtual currency Bitcoin, has sought clarifications from regulatory authorities before its launch that has already been delayed.
There are already close to 70 virtual currencies available across the world with total market valuation of about $15 billion (about Rs 90,000 crore), out of which Bitcoin is the biggest, valued close to $10 billion. The promoters of Laxmicoin, whose name is inspired by the Hindu goddess of wealth, Lakshmi, have been preparing to launch it as India’s first virtual currency for many weeks.
Bitcoin has competition (Image credit: Casascius)
However, RBI’s warning against use of Bitcoin and action initiated by Enforcement Directorate and Income Tax Department, among other authorities, against some bitcoin operators in India seems to have come in the way of Laxmicoin’s launch, industry players said. A number of bitcoin operators in India have already begun suspending their business following RBI’s warning last month against use of such virtual currencies due to potential money laundering and cyber security concerns.
According to posts on Laxmicoin’s Twitter page, its launch has been delayed due to “regulatory clarifications” and they hope to have clear guidelines from government soon. They further said that they have written to authorities and are waiting for their replies to avoid any “problems“. Another post said that they are “making good progress” and are in advanced level discussions with investors, while the launch would happen immediately after RBI’s response.
Another industry player said that RBI’s advisory came at a time when the virtual currency business was picking up pace in India. “Laxmicoin hasn’t heard from the central bank as yet. It is quite impossible to imagine the RBI will give a no-objection to any virtual currency promoter now,” he said. Various operators are expecting clear regulatory clarifications that virtual currencies are not illegal per se but experts say such hopes are futile given that virtual currencies are saddled with number of significant risks at the moment.
There have been regular reports of cyber criminals hacking and stealing virtual currencies across the world. Further, different virtual currencies continue to pop up almost every day, exposing users to unintended risks and losses arising out of scams perpetrated by cyber criminals, cyber security experts say. While the four-year old bitcoin shot to prominence with its per unit value soaring past $1,200 level recently, the heavy interest in such cryptocurrencies has led to the emergence of namesakes like Litecoin, Mastercoin and Dogecoin.
After falling close to $700 recently, the value of bitcoins has again regained $1,000 level (about Rs 63,000). However, total value of bitcoin and other such virtual currency trades in India is estimated to be worth only a few crores as of now, although NRIs living abroad are expected to be dealing with bitcoins in a big way.
Bitcoin can be generated through complex computer software systems with solutions shared on a network. The process is complex and such ‘mining’ can be done only on very powerful servers. The proliferation of new currencies is being linked to the complexities involved in the way bitcoin is ‘mined’. Bitcoins Alliance India (BAI), a community of Bitcoin entrepreneurs, said it welcomed the RBI warning about the risks surrounding the purchase, sale or use of Bitcoins. BAI has appointed Nishith Desai Associates, international Legal and Tax Counsellors, to examine the legality of Bitcoins.
There are an estimated 30,000 bitcoin holders in the country, currently in possession of 1 per cent of around 12 million bitcoins in circulation across the globe. “We’re seeing is a transition from global exchanges to local, country-specific exchanges as the global demand for Bitcoin rises. Many countries now have enough demand from their own citizens for a local, country-specific exchange to be hugely successful,” said Jinyoung Lee Englund, Director of Public Affairs, Bitcoin Foundation.