It is not only the US, China and Israel who are going through Bitcoin mania, even a tier II cities in India are embroiled in Bitcoin fever. Large number of Indian entrepreneurs from Ghaziabad to Kanpur to Darjeeling to Jaipur to Delhi to Ahmedabad to Mumbai are rushing to set up companies to cash in on this craze. At least a dozen companies, including some in past few weeks, have been registered in various parts of the country with ‘Bitcoin’ as part of their names while many more such applications are pending before the Registrars of Companies.
The numbers are even higher for the companies with the word ‘crypto’ in their names, while several others have sought to become more innovative by adding various prefixes to the word ‘coin’, including those proposing Indian versions like ‘IndiCoin’ and ‘BharatCoin’. There is also a ‘SwachhCoin’! The mad rush of entrepreneurs and investors seem to be continuing despite repeated regulatory warnings about Bitcoins and their various alternatives operating in a totally unregulated domain and the possible money laundering and terror financing risks associated with such cryptocurrencies.
The RoC filings made by such companies show diverse business activities they propose to undertake — One has listed ‘retail trade/repair of personal and household goods’, another claims to be in financial intermediary business, while one also claims to promote ‘investigative journalism’. There are also those offering ‘crypto coins’ exclusively for dentistry across the world with the promise of removing middlemen-type costs and easier insurance claims! Then, there are also those proposing ‘sex coins’ for discreet payments for adult entertainment and in sex trade.
A number of new entities have been set up under the LLP (Limited Liability Partnership) model while many others are being set up as privately-held companies. Several officials from the auditing and accountancy fields also said many listed companies are looking into changes in their names and ‘articles of association’ to include ‘Bitcoin’ or other cryptocurrencies to join the bandwagon.
While Bitcoin was created as a cryptocurrency in 2009, by an unidentified person using the alias Satoshi Nakamoto, its popularity has grown manifold in recent months with its per unit price soaring to close to USD 20,000 (over Rs 10 lakh) earlier this month. However, the price has been swinging wildly and last week itself, it fell by almost half to about USD 10,000, only to again rebound to the near USD 15,000 level.
It was launched with a promise of lower transaction fees than traditional payment methods with a decentralised authority unlike the government-issued currencies in various countries. At present, Bitcoins command a market cap of over USD 240 billion while more than 16 million units are said to be in circulation. The maximum supply is pegged at 21 million.
It is the anonymity of Bitcoins, minted through complex computer algorithms, that has made them so famous, but has also increased the risks. These are stored in digital wallets, in the cloud or on the user’s computers. These ‘coins’ are minted and traded with the use of blockchain technology, which uses cryptography for security of exchanges and providing a decentralised ‘digital ledger’ of transactions for all on the network to see.
Blockchain is a distributed ledger technology algorithm for managing digital cash without any central administrator and users remain unaware about each other. One blockchain network typically has thousands of nodes and a transaction is verified only after a majority of nodes reach consensus.