A fair bit of hype

The birth of the bitcoin in 2009 coincided with the immediate aftermath of the US financial crisis, but it was not pitched as an alternative to the ruling international referral currency, the US dollar.

The bitcoin website itself concedes that it is only a peer to peer currency. In any case, something that is not even the national currency of a country obviously cannot be an international currency.

The RBI, has cautioned against its use. Perhaps, it shares the widespread apprehension that when the novelty wears off and other crypto currencies spring up, the bitcoin might lose its sheen. The Chinese authorities too have taken a similar stance.

Oil-rich Norway which pioneered the idea of sovereign wealth funds, has called a spade a spade — bitcoin is like any other asset and capital gains made out of it will be liable to tax in that country.

In other words, Norway does not even confer the status of currency on bitcoin. Its view is that anyone making payment in bitcoin is actually indulging in a barter transaction, period.

The diametrically opposite take is that if the US dollar can rule despite being a fiat currency, what is wrong in bitcoin positioning itself as an alternative?

The argument is specious on many counts but before we take them up it must be conceded that the dollar too was foisted on IMF members through stealth.

To be sure, the dollar today is not underwritten by any commodity, much less gold, which is why it is called a fiat currency, one that can be freely printed with official sanction. This is what the US government has been doing all these years, knowing what the impact of such a cavalier attitude could be. But two wrongs do not make a right. The world has to address the problem of the greenback undeservedly hogging 70 per cent of international payments in a different way.

Underworld currents The way forward is certainly not a crypto currency which is perceived to be the currency of the netherworld or an instrument of money laundering.

An unregulated currency would be perceived as catering to those who do not want to do business transparently. Countries such as Kenya have fallen in love with bitcoin on the ground that it compliments its domestic mobile money transfer operations going by the name of M-Pesa, allowing its citizens to receive and make international payments through mobile banking.

Indeed, the bitcoin fascinates only those who have the ability and resources to mine it. Those who do not have these resources and ability perforce have to buy it from the market, operating in the virtual world.

By the way, there are bitcoin ATMs in Canada but all they do is convert them into Canadian dollars and vice versa.

(The author is a New Delhi-based chartered accountant .)

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