Following last week’s warning about virtual currencies including bitcoin by the Reserve Bank of India (RBI), four bitcoin startups have formed an association aimed to engage with regulators.
Zebpay, Unocoin, Coinsecure and Searchtrade are in the process of registering their newly formed ‘Blockchain and Virtual currency Association of India’. The three local bitcoin exchanges and the Singapore-based Bitcoin search revenue-share company met for the first time in Mumbai on Friday. Among topics they discussed was the recent RBI’s warning regarding digital currencies.
The Association was formed “just last Friday but it has yet to get formally registered”, Sathvik Vishwanath, Unocoin co-founder and CEO, told Bitcoin.com.
The new association hopes to achieve “uniformity in self-regulation and lobbying with the regulators regarding Bitcoin and blockchain technology”, he explained, adding that initially the Association will be “only for businesses and then we may open up for individuals as well”.
Also important to the group is making bitcoin trading safe in India by ensuring members follow strong know your customer (KYC) regulations, as well as helping educate their customers about Ponzi schemes and other risks associated with digital currencies.
In 2014, there was a previous Bitcoin association in India called the Bitcoin Alliance of India which is now defunct. According to the CEO of bitcoin exchange Coinsecure, Mohit Kalra, this association failed because Bitcoin companies were still small at the time.
Saurabh Agarwal, co-founder of Bitcoin trading and wallet company Zebpay said “we had thought of reviving the old association – Bitcoin Alliance of India”, however the four founding companies decided to include blockchain companies with Bitcoin in order to “create a larger association”. He noted “while we have been planning to create an association for some time, we finally pushed things after the circular.”
The association formed in part as a response to the latest notice about digital currencies issued by the RBI, which came February 1. Posted on their website, it cautions users, holders and traders of virtual currencies including bitcoins “about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to”. The RBI wrote:
The Reserve Bank of India advises that it has not given any licence / authorisation 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.
This recent notice also referenced the December 2013 notice which was the last time the RBI issued a guidance regarding digital currencies.
Although Bitcoin has never been banned in India, the RBI curbed the growth of the small Bitcoin community at that time by proclaiming that the creation, trade, and usage of digital currencies as a medium of payment is not authorized by banks and the monetary authority in India. They also warned citizens about digital currencies being prone to loss, and mentioned several impending threats to their bitcoins, including volatility, cyberattacks, and the likelihood of them being used for illegal activities.
In addition, according to Nishith Desai, a lawyer and advisor to the Association, the government is also “creating a regulatory board specifically for digital payments and BVAI requests to include regularization of virtual currencies in the same”.
Rising Bitcoin Trading Volume
At press time, the 24-hour trading volume between the Indian rupee and bitcoin is approximately 521 bitcoins, based on data from Coinhills. The site ranks the rupee as the fourteenth-most traded currency for bitcoin. Localbitcoins, which has the fourth-highest volume of any exchange in the country, has been showing rise in trading volume in both the Indian rupee and in bitcoin.
The association is launching at a perilous time in India. The Indian banknote demonetization last November caused a massive struggle for the poor and middle classes across the country, leading some to turn to bitcoin as a hedge against monetary strife. A major spike in volume across bitcoin exchanges and Localbitcoins was seen at the time, and today Indians are still dealing with the consequences of that program.
Do you think the Blockchain and Virtual currency Association of India will help the RBI warm up to Bitcoin? Let us know in the comments section below.
Images courtesy of Shutterstock, Zebpay, Coinsecure, Unocoin, RBI, Coin.dance
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