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| is-bitcoin-safe-and-legal |
Every few months, we hear that bitcoin has been banned,
As early; In 2013, bitcoin was "banned" by Thailand. In 2017, it was big news when China banned bitcoin and the latest news carries a ban by the Reserve Bank of India.
Bitcoin’s price last year was around 1,000$. right now, it is in the $9,000 range. This is in spite of the all the bans. This does not fit into any market logic. But that is the beauty of crypto currencies. They do not fit into traditional regulatory or banking framework.
so It is needed to understand how they work and why they were created in the first place.
so It is needed to understand how they work and why they were created in the first place.
DecentralizationThis is because bitcoin and most crypto currencies that run on Blockchain technology are decentralized. It means they do not run on one server or URL or IP address. These virtual currencies run on multiple nodes that can be owned and run by anyone and are usually spread across the globe. There is no central point for the governments to attack or block.
This is very similar to Torrent protocol. It is person-to-person. look here, if you hold bitcoin in your wallet and transfer it to another one's wallet, there is no way any government can block it because this entry of transfer is recorded in a distributed log.
This is very similar to Torrent protocol. It is person-to-person. look here, if you hold bitcoin in your wallet and transfer it to another one's wallet, there is no way any government can block it because this entry of transfer is recorded in a distributed log.
It has only prevented that banks will have to stop deposits and withdrawals to and from Indian rupee on crypto currency exchanges.
Apart from this, the RBI has issued several warnings about scams and risks related to crypto currencies. It had also said there would be a crackdown on the illegal use of such cryptos.
Some legal points are here that Why you should not invest in cryptocurrencies
#Extreme Volatility,
Investing in cryptocurrencies involves very high risk, as prices have been extremely volatile. Many experts are sceptical about bitcoin as an investment primarily because there is nothing for them to analyse.
Investing in cryptocurrencies involves very high risk, as prices have been extremely volatile. Many experts are sceptical about bitcoin as an investment primarily because there is nothing for them to analyse.
#Neither Commodity, Nor Currency,
The lack of clarity about its origin is another big issue related to bitcoin. In olden days, highly priced metals like gold, silver, etc. were used as currencies. Then came currencies printed by governments (or central banks) and these are called ‘fiat currencies’.
Though its proponents claim that cryptocurrency is ‘mined’ using complex mathematical formulae, they are reluctant to call it a commodity. They also claim that it is not controlled by any government and so, it is ‘democratic’. Therefore, cryptocurrencies don’t fall into the ‘currency’ category either.
Though its proponents claim that cryptocurrency is ‘mined’ using complex mathematical formulae, they are reluctant to call it a commodity. They also claim that it is not controlled by any government and so, it is ‘democratic’. Therefore, cryptocurrencies don’t fall into the ‘currency’ category either.
#An unregulated space
Unlike other investment avenues, cryptocurrencies are not regulated by government entities or banks. “There is no authority like Sebi that you can approach for grievance redressal,”
Ponzi schemes abound
Aside from the operational issues of trading in cryptocurrencies, there is also a high risk of fraud. There is still a good deal of misinformation and lack of clarity regarding bitcoin trading, and fraudsters have taken advantage of this to launch Ponzi schemes, which promise ‘guaranteed high returns’. Some companies claim to double the initial investment within a very short period of time. "beware of these unrealistic promises,”
Unlike other investment avenues, cryptocurrencies are not regulated by government entities or banks. “There is no authority like Sebi that you can approach for grievance redressal,”
“If we buy something with a credit card and get ripped off, we can call the bank and ask to be compensated. But if we get ripped off in a bitcoin transaction, it is impossible to get the money back.”
#The issue of legality
One major hurdle in the path of Indian investors who are interested in investing in cryptocurrency, is the confusion about its legal status. While they haven’t been declared illegal, cryptocurrencies are not recognised by the Reserve Bank of India (RBI) or any other authority in India, as a ‘currency’. In December 2013, the RBI issued a press release cautioning users, holders and traders of virtual currencies,including bitcoins, about the potential financial, operational, legal, customer protection and security related risks.
One major hurdle in the path of Indian investors who are interested in investing in cryptocurrency, is the confusion about its legal status. While they haven’t been declared illegal, cryptocurrencies are not recognised by the Reserve Bank of India (RBI) or any other authority in India, as a ‘currency’. In December 2013, the RBI issued a press release cautioning users, holders and traders of virtual currencies,including bitcoins, about the potential financial, operational, legal, customer protection and security related risks.
"In its latest press release dated 1 February, 2017, the regulator has further stated that RBI added, that the user, holder, investor, trader, etc. dealing with virtual or digital currencies will be doing so at their own risk."
Aside from the operational issues of trading in cryptocurrencies, there is also a high risk of fraud. There is still a good deal of misinformation and lack of clarity regarding bitcoin trading, and fraudsters have taken advantage of this to launch Ponzi schemes, which promise ‘guaranteed high returns’. Some companies claim to double the initial investment within a very short period of time. "beware of these unrealistic promises,”
"avoiding cryptocurrencies might be a smart move"
as incredible as cryptocurrencies have been, they come with an ever-growing list of risks and concerns. At the end of the day, investing in cryptocurrencies simply may not be worth the headaches they bring to the table.
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