To prevent fraud, cyber experts want bitcoins to be regulated

Post the recent WannaCry ransomware attacks, cyber experts are pushing for some form of regulation of bitcoins. They say while bitcoins should be legalised, there has to be a regulatory authority overseeing the transactions to prevent fraud.

Pavan Duggal, Supreme Court lawyer and cyber law expert, told BusinessLine , “Right now with no law officially recognising bitcoins, the bitcoin economy and its benefits are seeping away from the government.

“So if you are able to legally regulate it, then the bitcoin economy can also be part of the economic growth. The government must understand that more and more Indians would be using bitcoins.”

The hackers using WannaCry ransomware had sought payments in the form of bitcoins as they are difficult to trace.

Recently, the Centre sought public opinion on the issue and has asked if virtual currencies such as bitcoins be banned, regulated or subjected to self-regulation. It has invited suggestions on its discussion platform MyGov.

Cryptocurrencies have, for long, been a topic of debate globally. The Reserve Bank of India, like some other central banks, has so far only cautioned users against trading in cryptocurrencies because of their speculative nature, without venturing into legalities.

NS Nappinai, an advocate specialising in cyber law, said that the RBI may be best suited to regulate cryptocurrencies. “Cryptocurrencies, per se , are digital contracts that are enforceable. Suitable guidelines could be provided for maintenance of reserves in the hands of exchanges to protect against inadvertent loss or even for cyber insurance against hacking or loss through malicious attacks on digital wallets,” she said in an email response.

On April 1, 2017, Japan became the first country to notify bitcoins as a legal method of payment. It passed a legislation which explicitly differentiated between digital currency and electronic money. It notified bitcoin as an “asset” and thus gains made from it were made subject to capital gains tax.

But bitcoin players see self-regulation as a better option. “The industry is extremely new and so there is an opportunity in the first phase for the government to allow the industry to be self-regulated. In this period the government can observe the industry, understand what is happening and, at the right time, they (the government) can of course set up a regulatory framework,” said Sandeep Goenka, Co-founder of Zebpay, an app-based company, which enables Indians to trade in bitcoins.

Goenka said policy-makers should legalise bitcoins to start with. “There is confusion whether bitcoins and the world of cryptocurrencies are legal in India or not. That should be clarified that is the most important thing,” said Goenka.

Hesham Rehman, CEO, Bitxoxo, another bitcoin exchange in India, is of the opinion that self-regulation would be equally stringent and safe as government regulation. “In case of self-regulations, strong KYC from bitcoin exchanges and strict online bank transaction will ensure all the security. Also, all the transactions are traceable and in no way is it an option for money laundering or any other illegal activity,” he said.

Sathvik Vishwanath, Co-founder of Unocoin, a Bengaluru-based bitcoin exchange, said that getting to know the customer through proper documentation and the needed support through authorised access to platforms such as Aadhaar Bridge, making sure the trades happen only through the person’s bank account and some way of reporting suspicious transactions to the authorities would help the ecosystem and aid in the orderly growth of bitcoins in India.

But cyber experts reckon that self-regulation seldom works and some form of regulation or taxation should be applied. “Bitcoins can be made legal tender, and then the government can tax the bitcoins. So the government can gain revenues from the bitcoin eco-system,” said Duggal.