Should You Buy Bitcoin In India? We Demystify All The Confusion Around Cryptocurrency Right Now

In April 2018, Indian investors lost 2000 crore as a result of a cryptocurrency scam. This was just in Maharashtra alone.

Unfortunately, disruptions and losses caused by confusions about cryptocurrency are nothing new, as the past 12 months have seen multiple events in the cryptocurrency arena, across the globe.

Reuters

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Cryptocurrencies are confusing at best, but the situation seems to be going from bad to worse as the misfortunes have spread far and wide.

The advantages and disadvantages of cryptocurrency

* In August 2017, a devious stratagem was devised to con prospective investors out of their money at Enigma, another Ethereum platform. While the platform was preparing for an ICO (initial coin offering, which is an initial public offering with digital coins instead), scammers fooled unsuspecting traders into sending them US$500,000 in ¡®crypto-money¡¯ with a ¡®pre-sale¡¯ of tokens.

* In November 2017, the Hong Kong-based operator behind a digital currency known as Tether, which is pegged to the U.S. dollar at a 1:1 ratio, announced a theft of nearly US$31 million worth of its tokens from its digital coffers.

* In December 2017, Bloomberg reported that proceeds of ICOs topped US$4 billion, despite escalating warnings from US officials of rising risks and fraud.

ALSO READ: In Biggest Cryptocurrency Theft In India, Bitcoins Worth Rs 20 Crore Stolen From Exchange In Delhi

* In January 2018, Asia¡¯s biggest digital currency exchange, Coincheck in Tokyo, admitted the loss of around $534 million worth of cryptocurrency following an attack on its network.

* Despite growing concerns, currency exchange Zebpay India is adding 200,000 users every month, and predicts this number will grow to 500,000.

Reuters

Investors aside, local consumers are being conned into participating in Bitcoin-based multi level marketing (MLM) with promises of hefty returns on investments. While the leaders behind such scams have been arrested, Indian police reported that close to 8000 local residents in Pune were defrauded. Investigations are ongoing, but the police have since recovered 32 bitcoin and 79.99 ether (another cryptocurrency).

What the government can (or can¡¯t) do

Governments are unable to ban cryptocurrency. For example, after a close study of the risks posed by cryptocurrencies, Singapore¡¯s central bank concluded that there was no strong case for banning the trading of digital coins.

BCCL

India, with its push for demonitisation, is in a unique position. On the one hand, an outright ban of digital currency trading seems contradictory to its demonitisation push, while confusion about digital currency trading has resulted in huge losses amongst investors, businesses and everyday consumers. It doesn¡¯t help that Bollywood celebrities like Shilpa Shetty, Neha Dhupia and Huma Qureshi have embraced Bitcoin ¨C and encouraged their throngs of followers to do the same.

ALSO READ: Legal Or Illegal? Here's An End To All Your Confusion About The Use Of Cryptocurrency In India

Following the presentation of India¡¯s Budget 2018, cryptocurrency will not be recognised as legal tender. The authorities will instead encourage blockchain technology in payment systems. Finance Minister Arun Jaitley further reiterates, ¡°The government will take all measures to eliminate the use of digital currency to finance illegitimate services¡±.

India joins the list of nations that are planning to keep a more watchful eye on this space, such as Japan, China, the United States, South Korea, Australia, Russia, and the United Kingdom and other European Union countries.

Reuters

As virtual currencies ¨C once the preoccupation of the technologically-minded ¨C are looking to gain acceptance among ever broader sectors of society, risks and losses compound. It remains to be seen how, over the long term, the risks inherent in the newfangled currencies, the fundamental security-related challenges they face, and tighter regulation, pan out for virtual ¡®money¡¯.

Unless the myriad security concerns are addressed, more and more people investing in cryptocurrencies may face a harsh reality further down the road.

About the author: Nick FitzGerald, a renowned information security expert, is a Senior Research Fellow at ESET - an award-winning security software company which began in 1987 and now helps over 100 million users to Enjoy Safer Technology.