India warns on Bitcoin as investors rush in

The digital currency Bitcoin is rallying at phenomenal speed, leaving many high and others dry in markets around the world. But why are prices higher in India than elsewhere? The BBC’s Devina Gupta explains.

While the Bitcoin bull run has been welcomed by many, financial regulators in emerging economies are still trying to find a way to understand it.

The central bank of China has shut down Bitcoin exchanges in the country. Indonesia and Bangladesh have banned its use as a payment tool.

In India the government has made it clear that, while it doesn’t recognise Bitcoin as “legal tender” like paper money, there are no guidelines on Bitcoin trading.

In the absence of any specific legal framework, online Bitcoin trading platforms are operating freely, even as the Indian central bank is getting jittery.

It has issued its third warning this week, cautioning “users, holders and traders of virtual currencies including Bitcoin” of “economic, financial, operational, legal, consumer protection and security-related risks”.

But is anyone listening?

Experts claim that demand outweighs supply in India, pushing the Bitcoin price in the country up to 20% higher than international prices.

There are at least 11 Indian Bitcoin trading platforms online which claim that about 30,000 customers are actively trading at any given point of time. With a simple click, an investor can open an account and choose whether to purchase an entire Bitcoin or a fraction to trade with.

What is Bitcoin?

There are two key traits of Bitcoin: it is digital and it is seen as an alternative currency.

Unlike the notes or coins in your pocket, it largely exists online.

Secondly, Bitcoin is not printed by governments or traditional banks.

A small but growing number of businesses, including Expedia and Microsoft, accept Bitcoins – which work like virtual tokens.

However, the vast majority of users now buy and sell them as a financial investment…

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