Bitcoins booming a bit too much

Regulators panic with each passing day as they watch Bitcoin becoming increasingly popular day. Regulators are losing sleep over potential money laundering risks related with the digital currency. Fraudulent people can abuse it to entice naive capitalists.

This online currency is being widely accepted by certain retailers on the web in the U.S., China and a few others, for several functions like pizza delivery, which is adding to the Bitcoin threat.

Bitcoin, hardly three years old, has become world's most pricey currency with a per unit value of over USD 1,000 or about Rs.63,000. The question to regulators in India is if regulation is required or not, who should regulate it, what should be the standards, how to go about it, etc. Almost all financial sector regulators and agencies supposed to manage economic transgressions, like RBI, Sebi and various agencies under the Finance Ministry, are the ones working setting up the regulations.

One possible way out can be following the U.S., where authorities have decided to imply money laundering rules on Bitcoins like it is applicable to all other financial transactions in the country. Regulators are assessing claims made by some entities of being registered Bitcoin exchange providers. It is highly likely that they might have just registered as a company with the Registrar of Companies under some general businesses.

Regulatory authorities here are, allegedly, very much concerned about potential money laundering risks coming up from the thriving use of Bitcoins. The worst thing is that this virtual currency is becoming the latest fraudulent tool. Fraudsters are adopting it and promoting Bitcoins as the next big investment products with limitless returns.

Complaints about Bitcoins being used by some operators in some advanced and e-versions of multi-level marketing or ponzi schemes, has already made its way in.

There is grave fear about this new phenomenon giving rise to a new type of prohibited investment plan that could be very hard to track. The reason behind this is that there is almost no physical activity when dealing in Bitcoins and most transactions happen electronically.

Bitcoin, an'open source' product, can be cracked by anyone using a complex computer software, but, this is a complex process and can be cracked down only on very powerful computers.

The gigantic leap in the valuation of Bitcoins, from little more than USD 200 to way beyond USD 1,000 within the past month, is definitely the reason why people are getting attracted to it in India, which already has a few significant players offering Bitcoin exchange service online.

The fall of Liberty Reserve due to the charges of money laundering as well as the crash of a few other e-currency exchanges around the world, have added to the concerns of regulators.

The U.S. authorities have charged Liberty Reserve of working as a world banker for criminals and of laundering over six billion USD.

Bitcoin was started up in 2009 and the current number of Bitcoin units generated until now is at about 12 million. However, only a small number of Bitcoins are in use for actual commercial and retail reasons. A huge number of dealings are taking place due to speculative investment purposes.

In any case, the U.S. authorities have come across a few illegal cases via Bitcoin, like a case of payments for illicit drugs.