By Dr Sanjay Chaturvedi, LLB, PhD.
Abstract:
“Bitcoin is an innovative payment network and a new kind of money”, the official website of the Bitcoin claims. “Bitcoin: A Peer-to-Peer Electronic System” a white paper published by the said official website said. The author of the White paper Mr Satoshi Nakamoto maintains in his abstract that “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
There are two types of money. One is currency in its physical form published by the central bank by any nation which is authorized to print it according to the specifications and denomination of the respective governments. And secondly a credit money which is there in the system and with financial institutions having prerogatives to multiply with interest.
Every currency which is printed is a legal tender money. In India, we have Reserve Bank of India which is authorized by the RBI Act 1934 to print the legal tender money. A legal tender money or currency which had legal enforceable law that now one can not deny and refuse to accept as value of the goods or services rendered. Hence enforceable by law, a legal tender currency has legal standi and acceptance in the society. This legal tender money in the form of currency is backed by the promised of the Central Bank, in our country it is RBI, to pay the bearer the value worth printed on the currency. This is how system of legal tender money works.
Now, coming back to Bitcoin. Do it have geographical boundaries? The answer is No. Does it got minted or printed by any government on this earth? The answer is no. Then how does Bitcoin work?
According to BBC, “Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer. People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other person. Every single transaction is recorded in a public list called the blockchain”. Then how Bitcoin are originated? There three ways a Bitcoin can be originated or earned. First is you can buy Bitcoin using real money. Secondly you can sell / service things and let people pay you in Bitcoin and thirdly it can be created using a computer. Complex calculations and highly difficult sums and calculations are put to serve a single Bitcoin.
What is the value of Bitcoin and how it is determined? People buy Gold, diamonds and like such valuable things. Same thing is Bitcoin. A notional currency which is not having any legal tender promise from any government. People buy and sell, and even transact and accept in lieu of legal tender money. But is Bitcoin a legal tender money? The answer is No.
Can we see Bitcoin currency as black money? The answer is probably yes because no accounting system, and people can transact without having any account or financial trace. Saving taxes and no regulatory authority can restrict its transaction.
Why does Central Bank allow them? Well, in India, RBI had opposed the transactions in Bitcoins. And it can very well fit in Benami Transaction Act, where even a recipient is subject to penalties and prosecutions.
On 6th April 2018, RBI came with a circular to prohibit on dealing in Virtual Currency, specifically Crypto Currencies like Bitcoin.
In India, dealing in Bitcoin is prohibited. When you Google it, the value is some where Rs4,50,000/- for one Bitcoin. But can you deal in this? The answer is no. One can say that is barter currency which is having its own process of validation of transactions and authentications but without any promises of the originator.
A big notional currency to over ride the white money, an alternative route to save on taxes and conceal identity of person who is transacting it.