Bitcoin Current Affairs
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The capital market regulator Securities and Exchange Board of India (SEBI) is planning to bring Initial Coin Offerings (ICO) under its existing legal framework. In recent times, popularity of crypto currencies has increased rapidly and number of entities looking at raising funds through ICO.
Crypto currencies like bitcoin, ethereum and such offerings have been under government radar for long time. Even discussions were held between various regulatory bodies, including SEBI and Reserve Bank of India (RBI) to regulate crypto currencies. The RBI is of the view that these instruments are securities and so SEBI should be the regulating body. But these crypto-currencies are neither ‘commodities derivatives’ nor ‘securities’ under Securities Contracts (Regulation) Act, 1956.
Initial Coin Offering (ICO)
ICO is an unregulated means of crowd funding for project via use of cryptocurrency such as Bitcoin, Ethereum, Monero, DASH, Litecoin, Z-cash etc. It is like an equity initial public offer (IPO) where right of ownership or royalties of project is offered to investors in form of digital coins in exchange for legal tender or other cryptocurrencies.
ICO is mostly used to raise funds by start-up firms dealing in block chain technology and virtual currencies. Unlike an IPO, which is governed by SEBI regulations, there is no regulator for this kind of crowd sourcing in India. China’s Central Bank recently had banned ICO as dubbed it as an illegal public finance mechanism used for issue of securities and money laundering.
Crypto Currencies or Virtual Currencies are type of unregulated digital money. They are mainly peer-to-peer system, and transacted between users directly, without an intermediary. These transactions are verified by network nodes and recorded in public distributed ledger called blockchain.
They are neither issued by central bank/public authority, nor is necessarily attached to fiat currency, but is used and accepted among the members of a specific virtual community. They are being transferred, stored or traded electronically.
The Union government has constituted a time-bound inter-disciplinary committee to come up with an action plan for dealing with virtual currencies so as to fix the regulatory gaps in the existing framework governing virtual currencies. The committee is required to submit its report within three months.
The circulation of virtual currencies, of late, has become a cause of concern. With respect to the virtual currencies, Reserve Bank of India (RBI) has also cautioned the users, holders and traders of Virtual currencies about the potential financial, operational, legal, customer protection and security related risks through press releases in December 2013 and February 2017.
Virtual Currencies, also called as digital/crypto-currencies, are a type of unregulated digital money that is neither issued by a central bank/public authority, nor is necessarily attached to a fiat currency, but is used and accepted among the members of a specific virtual community. They are capable of being transferred, stored or traded electronically. The examples of virtual currencies are Bitcoin, Litecoin, Darkcoin, Peercoin, Dogecoin, Primecoin etc.
The nine-member inter-disciplinary committee will be chaired by Dinesh Sharma, special secretary in the economic affairs department. The committee will also have representatives from the Department of Economic Affairs, Department of Financial Services, Department of Revenue, Ministry of Home Affairs, IT ministry, Reserve Bank of India, NITI Aayog and State Bank of India.
The committee is mandated to:
- Take stock of the current status of Virtual Currencies both in India and globally;
- Examine the present global regulatory and legal structures governing Virtual Currencies;
- Suggest measures for tackling the issues related to Virtual Currencies including issues like consumer protection, money laundering etc;
- Examine other relevant issues related to Virtual Currencies.