Cryptocurrencies, fast gaining popularity, don't pose a systemic risk for Indian markets at present but what is unfolding needs watching, believes markets regulator Securities and Exchange Board of India (SEBI).
"Bitcoin does not pose a systemic risk right now but the area can't be ignored. The ministries of finance and information technology are looking into it, in consultation with the Reserve Bank of India (RBI)," SEBI chairman Ajay Tyagi, said at the CII Financial Markets Summit.
Given the meteoric rise in its price in the past few months, Bitcoin and other virtual currencies are a rage among investors. There are no regulations for investors to deal in these new-age currencies.
Tyagi said blockchain technology, the digital ledger used to track the ownership of bitcoin, could be used in the financial markets and that its aspects were being studied.
“Blockchain is a technology everyone will use. It has no regulatory oversight and that is something which needs to be encouraged. We are also encouraging use of blockchain and studying various aspects of it,” he said.
Tyagi further said Sebi would have to regulate bitcoin if these get traded as commodity derivatives. The government is yet to classify whether bitcoin is a currency or commodity.
According to a Reuters report, the digital currency market, including bitcoin, has swelled from $17 billion at the start of January to well over $600 bn.
This has led to concerns over what the fallout could be if the bubble were to burst.
Bitcoin set a record high of $19,666 on Sunday on the Luxembourg-based Bitstamp exchange, its prices having surged more than 10-fold this year.
However, there are very few avenues to use bitcoin in India. The trading volume could be Rs 200-250 crore every month. The Reserve Bank has issued repeated cautionary notes about the potential financial, operational, legal, customer protection and security risks to users, holders and traders of virtual currencies.