Due to the recent events in India surrounding Bitcoins, the bitcoin community in India feels the need to clear misconceptions and counter the fear raised by the media and the government agencies.
Bitcoin is an open source crypto-currency, with many programmers, cryptographers, and software engineers volunteering their time to develop this software. Bitcoin is one of the many crypto-currencies currently being developed and actively tested. The bitcoin community has repeatedly informed people that bitcoin is still highly experimental, and currently still in its Beta version.
Bitcoin relies on cryptography to provide security to users and facilitate transactions. It is also decentralized with no central authority, and instead it relies on the network to provide this security, mainly through the assistance of bitcoin miners and the public ledger system. All bitcoin transactions are stored in a public ledger, called the blockchain, that cannot be manipulated without the agreement of majority of network. Till date, the Bitcoin network or the blockchain has never been hacked, proving that the security of bitcoin is better than conventional systems. However bitcoins are vulnerable to user-end exploits, and can be stolen if users does not protect their wallet on their computer.
Online bitcoin transactions are safer than credit card transactions since the user would never need to expose their wallet to merchants and can transact using bitcoin public addresses. The chances of a Man-in-the-middle attack are nil, and compromised merchant systems would not provide an attacker to compromise the user’s wallet. We have already seen how vulnerable credit cards can be. In recent days more than 40 million user details and card details have been stolen from Target corp. If Target had used Bitcoins instead, all 40 million users have been saved.
When talking about money laundering using bitcoin, we in the community acknowledge that it can be used for such a purpose, and also it has been used by criminal elements for drugs and weapons purchases. However it is not different from cash in this regard, which has been used for this and is even less traceable.
We have worked hard to mitigate this, and the recent seizure and arrest of the illegal drugs website owner Ross Ulbricht, who ran Silk Road, was greeted as a positive sign by the bitcoin community, as indicated by the rise in bitcoin price. Criminal elements thrive when proper oversight and governance is not present, and when prohibition is implemented. In this case, the dangers of bitcoin being misused dramatically increase, pushing untraceable users to a maximum. In the presence of prohibition, governing or policing it would become impossible and would allow money laundering in the black market more easily accessible.
The bitcoin community has and always will want government oversight and it has been ready to open dialogue with the government. This dialogue would help in providing safety protocols, user tracking methods and training of law enforcement officials in investigation techniques using the bitcoin blockchain. We also feel that exchanges should be the point where user data is collected, using KYC. Exchanges serve as a vital point for providing traceable user information to tax authorities, and a point where regulation on the bitcoin environment in india can be properly maintained.
All the services which are providing Bitcoin Buy and Sell services in India have suspended their operations to achieve your objectives. We fear that the longer the uncertainty regarding the legal exposure stays, the sooner bitcoins in India will be move out of the radar and move into unfavorable domains. By the very nature of bitcoin, it cannot be regulated then.
A community delegation would be happy to meet regulators. Working closely with law enforcement agencies would help the bitcoin ecosystem become cleaner and safer. We eagerly await your response to allow our delegation to meet authorities and discuss these issues. Targeting legitimate users will not help deter criminals. It will only make criminals invisible.
-Indian Bitcoin Community
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