Reserve Bank of India Cautions Users of Virtual Currencies Against Risks [pdf](rbidocs.rbi.org.in)
rbidocs.rbi.org.in
Reserve Bank of India Cautions Users of Virtual Currencies Against Risks [pdf]
http://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/IEPR1261VC1213.pdf
9 comments
I'd say it's neither a feature nor a bug; it's just different in a way that's partially incompatible with credit-based payment schemes.
This incompatibility shows up with Coinbase, where they require a bank account number and a credit card number and identity verification to buy Bitcoin instantly because they're bridging the gap and have no recourse if someone scams them. Not exactly peer-to-peer or anonymous.
Payment companies like credit card issuers or Paypal do a lot of policing of shady vendors and shady customers. If you're just using cash then it's buyer beware. But on the other hand, it allows you to make a payment when a bank wouldn't allow it.
This incompatibility shows up with Coinbase, where they require a bank account number and a credit card number and identity verification to buy Bitcoin instantly because they're bridging the gap and have no recourse if someone scams them. Not exactly peer-to-peer or anonymous.
Payment companies like credit card issuers or Paypal do a lot of policing of shady vendors and shady customers. If you're just using cash then it's buyer beware. But on the other hand, it allows you to make a payment when a bank wouldn't allow it.
Yes and further I think every single bullet point can be said about regular money.
Banks are not invulnerable to hacking.
If you get hustled for your pocket money in the street then the police will have to find the perpetrator with any means at hand. Just because it's an electronic currency does not mean anything is different here.
Are they trying to say that every single Indian citizen could withdraw their money as gold or some equally valuable substance that they can equate to cash money in society?
Wealth truly knows no god and no master, nor any border.
Beware of the propaganda, fear what you don't understand.
Banks are not invulnerable to hacking.
If you get hustled for your pocket money in the street then the police will have to find the perpetrator with any means at hand. Just because it's an electronic currency does not mean anything is different here.
Are they trying to say that every single Indian citizen could withdraw their money as gold or some equally valuable substance that they can equate to cash money in society?
Wealth truly knows no god and no master, nor any border.
Beware of the propaganda, fear what you don't understand.
This! Exactly the point I made above! Same issues plague "traditional" banks and RBI has imposed very limited liabilities on Bank or even safeguards like this one https://www.pcisecuritystandards.org/security_standards/. So if the Target fiasco had happened in India, Target would have minimum if any liabilities. Why do you think "cash on Delivery" is such a big thing in India. Consumers are paranoid, not just because it's their habit, they just feel vulnerable with no recourse even with traditional banking.
Also, services like Bitrated are providing decrebtralized consumer production.
The main reason that India is concerned about this is it's ability to tax foreign income of resident Indians. If bitcoin or other VCs allow people to earn money overseas and then get paid in a complete "cash only" fashion it could sidestep income tax.
It may be a reason, but it is not the main reason, not by a long shot.
India has a chronic problem of tax evasion, in the grand schemes of things only a handful of their citizens can claim a defense/offense of "it's ability to tax foreign income of resident Indians", since only a handful do not have the ability to evade taxes or have never deliberately evaded taxes.
A quick search for "tax evasion in India" can educate on this topic, including an article[0] that states "tax evasion is India's national sport."
My Indian friends tell me, that they don't feel bad evading taxes a little since the politicians, bureaucrats etc would squander it through bribes and scandals. To which I say, perhaps the main reason for rampant scams and bribery is that taxes are evaded and these public employees are paid poorly.
[0] http://www.businessweek.com/magazine/in-india-tax-evasion-is...
edit:
On re-reading my comment I realized that I was unclear why in it's current scope RBI's main concern is not the scope of tax evasion. Currently India looses over $300B to tax evasion each year, even if all of bitcoin's market cap was taxable by India this would be a very small fraction of their tax losses.
I believe the real reason lies in addressing customer grievances. India is plagued by numerous scandals and scams in the private sector and the only resort for most people is going to the consumer courts if they can afford it. Their already few options would be obliterated if they choose to deal with bitcoin.
While this may be a concern in the developed countries, its not nearly as bad as the situation in India and similar economies.
India has a chronic problem of tax evasion, in the grand schemes of things only a handful of their citizens can claim a defense/offense of "it's ability to tax foreign income of resident Indians", since only a handful do not have the ability to evade taxes or have never deliberately evaded taxes.
A quick search for "tax evasion in India" can educate on this topic, including an article[0] that states "tax evasion is India's national sport."
My Indian friends tell me, that they don't feel bad evading taxes a little since the politicians, bureaucrats etc would squander it through bribes and scandals. To which I say, perhaps the main reason for rampant scams and bribery is that taxes are evaded and these public employees are paid poorly.
[0] http://www.businessweek.com/magazine/in-india-tax-evasion-is...
edit:
On re-reading my comment I realized that I was unclear why in it's current scope RBI's main concern is not the scope of tax evasion. Currently India looses over $300B to tax evasion each year, even if all of bitcoin's market cap was taxable by India this would be a very small fraction of their tax losses.
I believe the real reason lies in addressing customer grievances. India is plagued by numerous scandals and scams in the private sector and the only resort for most people is going to the consumer courts if they can afford it. Their already few options would be obliterated if they choose to deal with bitcoin.
While this may be a concern in the developed countries, its not nearly as bad as the situation in India and similar economies.
I think you're mistaken. Tax evasion is rampant because enforcement is hard. Salaried people are taxed at source, so there isn't too much evasion there. Similarly your big retail chains don't evade VAT because they're easy pickings for the tax authorities. Non-salaried people, small-time business persons etc. evade tax because there isn't really a paper trail of their earnings, and also because complying with tax laws is a massive pain in terms of effort and bookkeeping. In the rural areas, nobody even bothers because it's simply not worth the effort.
> To which I say, perhaps the main reason for rampant scams and bribery is that taxes are evaded and these public employees are paid poorly.
Not really. India is a poor country and public employees are paid well-above the median income. Even the lowest level of public employees - sweepers, janitors and the like make more than 2.5X the median income. [1] And bureaucrats who are worth bribing get well more than that. Corruption in India and most other developing countries is a prisoner's dilemma type of situation. Each individual benefits from being corrupt and there is significant improvement in quality of life if you earn $1200 a month instead of $900 month. So they choose to be corrupt and this is more or less a rational decision. It isn't an easy problem to solve, especially in the current world order with restrictive immigration practices.
[1] http://latestjobsingovt.com/freshers/peon-watchmensweeper-jo...
> To which I say, perhaps the main reason for rampant scams and bribery is that taxes are evaded and these public employees are paid poorly.
Not really. India is a poor country and public employees are paid well-above the median income. Even the lowest level of public employees - sweepers, janitors and the like make more than 2.5X the median income. [1] And bureaucrats who are worth bribing get well more than that. Corruption in India and most other developing countries is a prisoner's dilemma type of situation. Each individual benefits from being corrupt and there is significant improvement in quality of life if you earn $1200 a month instead of $900 month. So they choose to be corrupt and this is more or less a rational decision. It isn't an easy problem to solve, especially in the current world order with restrictive immigration practices.
[1] http://latestjobsingovt.com/freshers/peon-watchmensweeper-jo...
Actually there is a singular reason for the tax evasion and it has nothing to do with people "wanting" something.
Real estate.
Some of India's real estate is priced as high as Manhattan, but the sale process is murkier. The reported sale figure (for tax purposes) is much lower than the actual sale figure. This is very interesting for people used to Zillow - why would someone agree to a transaction like this? How does the actual exchange take place without any backing paperwork?
In fact, there are people who claim that there is a physical bundle of a few billion dollars that keep changing hands as people sell and buy real estate - pretty much a closed system. There have been many attempts by startups to pull a Zillow in India, but most of them failed (including one I was associated with).
Now here's the interesting point about bitcoin - I mentioned above that the current real estate market is a closed system. The Indian govt has taken a series of rightfully justified steps to eliminate physical cash from the financial system - in India, you need to pay a charge to withdraw cash from a bank and also fill in extra paperwork. This ensures no new cash enters the real estate system.
Bitcoin could potentially upset the system.
Real estate.
Some of India's real estate is priced as high as Manhattan, but the sale process is murkier. The reported sale figure (for tax purposes) is much lower than the actual sale figure. This is very interesting for people used to Zillow - why would someone agree to a transaction like this? How does the actual exchange take place without any backing paperwork?
In fact, there are people who claim that there is a physical bundle of a few billion dollars that keep changing hands as people sell and buy real estate - pretty much a closed system. There have been many attempts by startups to pull a Zillow in India, but most of them failed (including one I was associated with).
Now here's the interesting point about bitcoin - I mentioned above that the current real estate market is a closed system. The Indian govt has taken a series of rightfully justified steps to eliminate physical cash from the financial system - in India, you need to pay a charge to withdraw cash from a bank and also fill in extra paperwork. This ensures no new cash enters the real estate system.
Bitcoin could potentially upset the system.
> but most of them failed (including one I was associated with).
What was the name of your startup. Housing.com is doing a pretty job imho.
What was the name of your startup. Housing.com is doing a pretty job imho.
most of them are doing well - but NOT in the Zillow segment. It is when you start wading in the murky waters of Indian secondary real estate sales, that you hit all these issues.
My work history is in my profile.
My work history is in my profile.
Related to this point, India also has pretty big problems with black money and the black market. Bitcoin is not going to make it better.
While tax evasion is a definite concern on the back of RBI's mind. My hunch is it has more to do with the fear of triggering more depreciation of the Rupee which hasn't even recovered completely from its historic downward spiral earlier this year. A related concern is all this resulting in higher inflation, another problem that has plagued the economy. And I really doubt the RBI cares much about customer grievances. Credit card scams are the norm is India and it has never ever imposed stricter regulations and liabilities on Banks. So even though it highlights the concerns, in reality I really doubt the RBI cares if people get duped or not. It's just a fear tactic.
Well in the past,RBI has shown no remorse towards online currency, for example Paypal.
They had a free run, until RBI got into the scene. Now their business is as good as nothing.
It allowed many Indian paychannels to emerge though, Paytm is a good example.
Indian financial policy makers tend to have a "safe and proven first" attitude towards such things. No wonder, we fairly did better than many european countries, during the 2007-08 subprime losses fallout. Not a single bank defaulted, ICICI which had the highest exposure(if my memory serves me right), was still in black even after the write-off.
They had a free run, until RBI got into the scene. Now their business is as good as nothing.
It allowed many Indian paychannels to emerge though, Paytm is a good example.
Indian financial policy makers tend to have a "safe and proven first" attitude towards such things. No wonder, we fairly did better than many european countries, during the 2007-08 subprime losses fallout. Not a single bank defaulted, ICICI which had the highest exposure(if my memory serves me right), was still in black even after the write-off.
Could you please elaborate on Paytm? From what I see on their site they are more of utility payments site than true paychannel. Perhaps payzippy or payu are better examples?
Could you provide more info on what RBI did with regards to PayPal?
Here's what they did http://techcrunch.com/2011/01/28/reserve-bank-of-india-restr... but later relaxed a bit http://gadgets.ndtv.com/internet/news/paypal-now-allows-indi...
I came here expecting something stupid but this doc isn't completely unreasonable. From the perspective of warning newbies or my mother (say) about investing in bitcoin, it does a fair job. Or rather, it could have been far, far worse.
[deleted]
I think the Reserve Bank of India is afraid of the Indian Rupies inflationary past and that Bitcoin might offer a better alternative. Inflation is but a hidden tax of the populations wealth.
Historic inflation data for India http://www.inflation.eu/inflation-rates/india/historic-infla...
Historic inflation data for India http://www.inflation.eu/inflation-rates/india/historic-infla...
[deleted]
Worth noting that RBI's current governor is Raghuram Rajan (since September), Chicago Booth's "star professor" and one of the world's most famous economists. Also known for saying that "innovation had made finance more dangerous." (in 2005).
http://www.economist.com/news/finance-and-economics/21583275...
http://www.economist.com/news/finance-and-economics/21583275...
>> The Reserve Bank has mentioned that it has been looking at the developments relating to certain electronic records claimed to be “Decentralised Digital Currency” or “Virtual Currency” (VCs), such as, Bitcoins, litecoins, bbqcoins,
dogecoins etc., their usage or trading in the country and the various media reports in this regard.
Dogecoins? Seriously? They are thinking the dogecoin parody is real?
I am wondering if the people behind this study knew what they were doing or if they just "googled" it.
Dogecoins? Seriously? They are thinking the dogecoin parody is real?
I am wondering if the people behind this study knew what they were doing or if they just "googled" it.
It might have started that way but Dogecoin has seen a surge in trading recently, and a growing "legitimate" user base recently https://bitcointalk.org/index.php?topic=361813.0 So it's completely fair to name it among the likes of Bitcoin and Litecoin.
I mean, it's a coin just like any other...
Your insecurity is showing.
timely caution
Millions of Dogecoin stolen in Christmas hack http://www.theverge.com/2013/12/26/5244604/millions-of-dogec...
Millions of Dogecoin stolen in Christmas hack http://www.theverge.com/2013/12/26/5244604/millions-of-dogec...
"Payments by VCs, such as Bitcoins, take place on a peer-to-peer basis without an authorised central agency which regulates such payments. As such, there is no established framework for recourse to customer problems / disputes / charge backs etc."
And stopping payments is not the right way to address customer problems.