To protect Indian investors from unlawful promises, market watchdog SEBI said it will take action against unlawful initial coin offers seeking public investment schemes with the promise of high returns from Bitcoin and other such currencies.
SEBI is not keen to take on the mantle of a regulator for such trading as the underlying product, which is Bitcoin or any such cryptocurrency, is not an approved product by RBI or any other agency, top officials were quoted as saying to PTI.
A number exchanges and those claiming to ‘mint’ cryptocurrencies are suspected to be indulging in fraudulent activities without actually minting any such virtual currencies that require very complex algorithms, the officials noted.
This is not the first time that such notices being issued to cryptocurrencies or investment related to them. Earlier, Reserve Bank of India (RBI) warned people against investment in them as it does not approve any of them.
“Virtual currency is stored in digital-electronic media that are called electronic wallets. Therefore, they are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack etc. Since they are not created by or traded through any authorised central registry or agency, the loss of the e-wallet could result in the permanent loss of the VCs held in them. Payments by virtual currency take place on a peer-to-peer basis without an authorised central agency which regulates such payments,” stated RBI in a statement.
Bitcoins are also being traded on exchange platforms set up in various jurisdictions whose legal status is also unclear. Hence, the traders of virtual currency on such platforms are exposed to legal as well as financial risks, added the RBI.
Recently, tax officials conducted raids on various exchanges and reported to have gathered informations on lakhs of entities including HNIs.
Central banks of many countries such as Russia and China have warned against making investments in virtual currency.
Among the renowned names accepting bitcoins online are Dell, Dish Network and Expedia. Japan has officially recognised bitcoin as a payment method in April. After China and Japan, Australia is attempting to regulate bitcoin exchanges.
What is Bitcoin and how it works?
It is a virtual currency, whose operation is not controlled by a central bank. People buy and sell goods on the internet using bitcoins. The founder of bitcoin is Satoshi Nakamoto, who is an unknown hacker and Silicon Valley geek.
Bitcoin is primarily based on a simple theory of economics – when unlimited demand chases finite supply, the result is sky-rocketing prices. It is created by computers that have a capability of solving complex math calculations or problems.
Bitcoins are available on bitcoin exchanges. There are many companies such as Unocoin, Zebpay, BuyUCoin and Coinsecure that help you buy or sell bitcoin online. You could also purchase bitcoins from other users.