Enhanced regulatory oversight in India and other countries seems to be having little impact on spread of bitcoins and other virtual currencies, whose number is fast moving towards a century with a total valuation of close to $13 billion.

A number of new entrants, such as bitgem, catcoin, unobtanium and sexcoin, have arrived on the scene even as regulators across the world grapple with risks posed by such currencies and transactions conducted through them.

At least 93 virtual currencies are at present being used by people across the world over the internet, as also for some offline transactions, and their total valuation has reached $13 billion (over Rs 80,000 crore), out of which bitcoin alone accounts for over $9 billion, according to market estimates.

At end of December last year, the number of virtual currencies stood at 67.

Total value of bitcoin and other such virtual currency trades in India is estimated to be worth only a few crores of rupee as of now, but their usage seems to be growing and NRIs living abroad are expected to be dealing with virtual currencies in a big way.

Within four years of coming into existence, bitcoin has become the world’s most expensive currency and its per unit value soared past $1,200 level or about Rs 63,000 recently, although the prices have now slipped below $750 apiece (Rs 45,000).

After RBI and other central banks across the world warned financial intermediaries about dealing with virtual currencies through traditional channels, the buzz around such denationalised currencies, which are not backed by any assets, had tempered for some time.

The renewed proliferation of new currencies is being linked to the complexities involved in the way bitcoin is ‘mined’ and the newer avatars are comparatively much easier to create, word-of-mouth publicity and a rush of speculators has ensured they are catching up much faster, traders said.

These virtual currencies are increasingly being used to pay for goods and services with retailers, restaurants and entertainment venues. Some Universities, cafes, bars are accepting bitcoins and even products like bikes and furniture are being sold online for these currencies.

However, experts and regulatory officials feel different virtual currencies expose users to unintended risks and also losses arising out of scams perpetrated by cyber criminals looking to make a quick buck.

Illegal drug cartels and those indulging in money laundering activities are said to be increasingly opting to transact through virtual currencies due to anonymous, low transaction cost and difficult to trace nature of environment.

While most platforms require users to upload images of government photo IDs (passport, driver’s licence etc), proof of address documents (utility bill, vehicle registration etc) as well as online banking account details, the under-ground market is teeming with unscrupulous operators.

After suspending their operations for a few weeks amid growing regulatory glare, many bitcoin operators have cautiously resumed courting business from their clients and some new players have also come to fore in India.

At the same time, many bitcoin operators and even some corporate houses have recently stepped up their lobbying for a clear regulatory framework on digital currencies in India.

(This article was published on February 9, 2014)
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