Economists call it an asset bubble. Some think its anonymity makes it useful only as money for criminal transactions or money laundering. There is vast amounts of gray area still surrounding the utility and nature of the Internet crypto currency Bitcoin even among its most ardent early adopters from the information technology and financial communities. Financial regulators around the world are playing it by ear on policies regarding Bitcoin and whether the anonymous peer-to-peer transaction enabler,akin to a barter system,is a financial instrument with pitfalls attached to it or a plain technological innovation that can redefine one of the pillars of human society the monetary system. Much of the churning and uncertainty in the Bitcoin world that has caught global attention in the past few weeks after the virtual currency of one Bitcoin was valued at over $1,000 was evident at a Global Bitcoin Conference,the first ever in India,that was held in Bangalore on Sunday. Financial start ups playing with Bitcoin in the speculative markets,IT start ups trying to create powerful computer mining tools for Bitcoin,people just trying to understand what the fuss is all about all carved from the strong tech community in Bangalore,were part of the event. For over 4,000 years,money and religion have been among the pillars of society that have been centrally controlled. I am curious to know if a decentralised system like Bitcoin is going to shake up the system, said Bhaktha Keshavachar,co-founder and CTO of Ezetap a tech start-up in Bangalore which is offering mobile solutions for regular monetary transactions. Like the printing press and the Internet,Bitcoin is a technology of trust that could return human society to a natural order that is outside of the centralised control of the state and the church,Johann Gevers,the co founder and CEO of the US start-up Monetas said. Bitcoin is a return to a people-based system that allows for a decentralised society on a large scale,he said. Bitcoin is a technology. It is a like a knife it can be a murder weapon or a life saver in a surgeons hands. You can use it for many things. It is fundamentally a decentralised consensus instrument, Gevers said. The Bitcoin system is a work-in-progress and requires large amounts of infrastructure including energy and computing power and there are of a lot of issues surrounding security,forgery,trust,speed of transactions,he said. According to Josh Zerlan,operations manager for Butterfly Labs,one of the key makers of computing tools to derive Bitcoins,the Internet currency system is deflationary in nature compared to the Fiat currency systems around the world. It would enable transactions in low denominations of currency as well which is not possible in inflationary systems,he said. The maximum amount of Bitcoins that will be available is only 21 million and 12 million of this has been created since the currency appeared on the Internet in 2009. Only 40 per cent of the 21 million which will be created by the year 2142 will be in circulation,Zerlan said. The market cap for the 12 million Bitcoins in existence was estimated to be $7.2 billion in November this year. According to estimates there are over 11 million global Bitcoin users with around 50,000 in India. Nearly 50 per cent of Bitcoin currency is reportedly vested with around 1000 individuals. While Bitcoin mining has until now been an art for advanced software technologists with the hardcore techies jumping onboard first,efforts are now on to make it accessible for even ordinary Internet users to mine for Bitcoins,said Gangesh Ganesan founder and CEO of the San Francisco based Bitcoin start-up High Bit Coin. In India,Bitcoin is used primarily for speculation by comparing it with the dollar,for investment and hedging with financial instruments,says Mahin Gupta,a former software engineer and founder of buysellbitco.in,the first company in India to trade using Bitcoin. No one wants to understand the intrinsic value of Bitcoin in India. It is undervalued. You talk to anyone and they will compare the value of Bitcoin to the dollar, Gupta said. According to Gupta one of the key concerns of people dealing with Bitcoin as a financial instrument is that there is no clearly defined regulatory process in India over Bitcoin transactions by the RBI or any other agency. If there was some kind of advisory from regulatory authorities on Bitcoin transactions there would be more clarity. Regulatory authorities are also still trying to learn. There are a lot of entrepreneurs who want to get in but they are kept back by the lack of policy, Gupta said. It would be a mistake for regulators to classify it. They should not box it. There are millions of things you can do with it. Regulators should not make new laws they should apply existing laws otherwise they will limit innovation. In Switzerland it is treated as foreign currency,in Germany it is a unit of account, Gevers said.
