Legality of Bitcoin
RBI Said No
Reserve Bank of India in 2018 had directed banking institutions to not deal with or provide services to any individual or business entities dealing with or settling virtual currencies (also known as cryptocurrencies). Additionally, the bodies providing such services were given a three months window within which they were supposed to halt such services and deals.
SC Said Yes
This circular was challenged through a writ petition in the Supreme Court. The writ petition under Article 32, was brought by the Internet Mobile Association of India (IAMAI). The circular was set aside by the Supreme Court on the grounds of proportionality.
The Court pronounced that since RBI had found no adverse consequence on the entities that it governed due to cryptocurrency, and when virtual currency itself faced no ban, the circular was disproportionate and thus liable to be set aside.
With the ban set aside, banks that subsequently closed the accounts of crypto exchanges, forcing some of them to shut down, including Zebpay, Coindelta, and Koinex, can now deal in virtual or cryptocurrencies.
Crypto trading has risen since the judgement was pronounced by the Supreme Court.
What is Bitcoin?
For understanding what a Bitcoin is, we have to understand what a cryptocurrency or a virtual currency is.
Cryptocurrencies are internet-based mediums of exchanges. They employ the use of blockchain technology. The advantage that they offer is that it is not controlled by any central authority. Records of ownership are stored in a digital ledger or blockchain using strong cryptography to secure transaction record entries.
Bitcoin is the first implementation of a concept of cryptocurrency, which was first described by Wei Dai who suggested the idea of a new form of money that used cryptography to control its creation and transactions, rather than a central authority.
The initial Bitcoin specification and proof of concept were published by Satoshi Nakamoto. Satoshi left the project in late 2010 without revealing much about himself. Bitcoin is a decentralized peer to peer payment network. Nobody owns the Bitcoin network. There are no servers or central controlling authority.
Bitcoins can be obtained as payment for services or goods, can be purchased or can be earned through mining.
Uses of Bitcoin
Bitcoin is used for several purposes. It can be used to buy goods or services where it is accepted. Even the judgement of the Supreme Court discussed how sources suggested that a few eateries in Mumbai, Bengaluru and Chennai accepted payment through virtual currencies. Platforms or intermediaries also provide gift cards in exchange for payment being made in virtual currencies. A good example of the same would be Dell, that accepted payment in Bitcoin but later stopped due to low demand. Overstock, tech-driven online retailer accepts payments in Bitcoin. There are platforms such as OpenBazaar that accept payment only in the form of cryptocurrency.
People also invest in Bitcoin. Although they are high-risk investments as the market is extremely fluctuating and the impending possibility of them being outlawed in certain jurisdictions makes people still invest in Bitcoin.
A person can become a Bitcoin miner by running software with specialized hardware. Miners contribute their computing power to solving complicated cryptographic puzzles, which is necessary to confirm a transaction and to record it in a distributed public ledger (Blockchain). The difficulty of the puzzles is constantly increasing, correlating with the number of people trying to solve it. Thus, initially, mining could be done using just a computer, but presently, it requires heavy hardware. Mining is extremely competitive but rewarding. Once a cryptographic puzzle is solved, are entitled to a reward as well as a transaction fee.
Apart from this, there are some other miscellaneous methods through which a Bitcoin can be used. Microsoft lets one add Bitcoin to top up their account. Wikipedia accepts donations in the form of Bitcoin.
Where to Buy Bitcoin in India?
Bitcoin is currently is one of the best-performing asset class in the last one year, with S&P down 14%, Dow Jones down 21% and Gold down 21%, during the same 12-month period, data provided by Crebaco Global Inc - a research provider on blockchain and cryptocurrency, showed. Due to the judgement from the Apex Court, the demand has also increased.
Bitcoin can be purchased on crypto trading platforms. Bitcoin can also be purchased on exchange platforms, such as Wazirx, crypto exchange in the country. A potential purchaser considers the fee structure of a cryptocurrency exchange over others is the fee structure.
Zebpay, another one of the largest exchanges in the country, was recently re-launched. Unocoin charges a fee of 0.7% to buy or sell Bitcoin. Crypto exchange Coins Cx charges 0.0005 BTC for withdrawals.
Cashaa, Pocketbits, Giottus, and Bits are other known exchanges in India. Paxful is another platform that lets one buy, sell and send Bitcoin. CoinDCX, an India based crypto exchange, continued to operate even after the ban.
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