While e-commerce retailers turned out to be losers and digital payment providers emerged as gainers following Prime Minister Narendra Modi's 'surgical strike' on black money on November 8, bitcoin traders are receiving frantic calls from people wanting to exchange cash for bitcoins.
ZebPay, the largest trader of the digital currency in the country and is currently adding around 25,000 new bitcoin customers every month, has registered a 20% to 30% spike in queries about bitcoin since the prime minister announced the crackdown on higher currency denominations of Rs 500 and Rs 1000 with the stated aim of fighting tax evasion, corruption and financing of terrorism.
As queries from India grew, bitcoin prices surged, trading in India 8% costlier than in the US. But the callers were disappointed when ZebPay informed them that they will have to give their bank account details and undergo a know-your-customer (KYC) process in order to buy bitcoins.
"I've had to put most of my operations guys in fielding calls and telling callers that this would not be possible," Sandeep Goenka, co-founder of Zebpay (Zeb Ventures Pte Ltd), was quoted as saying by LiveMint.
Bengaluru-based Unocoin Technologies, which also deals in bitcoin trading, confirmed that the situation is eerily familiar. On Tuesday, Unocoin partner Purse.io reported that India ranks second in the number of users making bitcoin purchases through its Amazon discount service.
ZebPay founder Sandeep Goenka, however, says the current trend is an outcome of a lack of awareness among people on how bitcoin actually works.
What are Bitcoins?
A de-centralised crypto-currency conceptualised by Satoshi Nakamoto in response to the collapse of trust in banks in 2008, Bitcoin is based on a technology called blockchain.
Through the use of bitcoin software, users can bypass intermediaries and send and receive money over the internet. Each transaction through bitcoins is anonymized and recorded in a public ledger so that transactions can be verified and double spending can be kept under check.
The paperless, bank-less, and stateless currency is gaining ground as it can be used just the same way that any digital money is used to pay for goods and services, such as buying coffee, a meal at a restaurant or even clothes. Via ZebBuy, for instance, one can buy Amazon or MakeMyTrip vouchers, or even pay bills.
Why is Bitcoin not anonymous anymore?
Bitcoin technology was exploited initially as it facilitated illegal activities over the internet such as the trade of drugs and guns through a marketplace known as Silk Road.
FBI detectives were able to arrest the creator of Silk Road, who was subsequently sentenced to life in prison in February 2015. Eventually, researchers were able to map each bitcoin transaction to a corresponding IP address and hence erase anonymity for criminal activity.
Though the Reserve Bank of India hasn't issued any guidelines on bitcoins, in December 2013, it cautioned citizens about the risks associated with virtual currencies.