Monthly Archives: March 2017

Fmr. NSA Director: Trump’s Military Spending Increase is Needed … – Fox Business

Posted: March 4, 2017 at 12:57 am

During an interview with Neil Cavuto on the FOX Business Network, former NSA Director Gen. Keith Alexander addressed the recent controversy involving Attorney General Jeff Sessions and allegations he communicated with Russian diplomats during the presidential election, despite stating that he didnt during his confirmation hearing before Congress.

Well, I think the facts are what we need and I think jumping to the conclusion that the Attorney General did something wrong is a big jump, General Alexander said.

He went on to add that he doesnt believe Sessions intended to mislead or do anything wrong.

In a statement to Fox News, the Attorney General denied the accusations, I never met with any Russian officials to discuss issues of the campaign. I have no idea what this allegation is about. It is false," he wrote.

Alexander also noted that the presidents promise to rebuild the military and to increase defense spending by $54 billion is a good thing.

I have tremendous confidence in Secretary Mattis. He is a good person. He will take the money needed; he will come back with a great plan and help get us the military that we need.

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Alexander went on to add that taking care of those who would give their life for this nation is the right thing to do.

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Florida Supreme Court Rules the Second Amendment Doesn’t Protect Open Carry – Slate Magazine (blog)

Posted: at 12:55 am

Open carry in action.

Erich Schlegel/Getty Images

On Thursday, the Florida Supreme Court upheld a state law prohibiting the open carry of firearms in public, ruling that the Second Amendment does not protect the practice. The decision is yet another legal setback in gun advocates recent struggle to persuade the courts to strike down a wide range of firearms restrictions as unconstitutional. Like many other state and federal courts throughout the country, the Florida Supreme Court concluded that the Second Amendment cannot be read to bar states from regulating the manner in which firearms are kept and used.

Mark Joseph Stern is a writer for Slate. He covers the law and LGBTQ issues.

As the court noted at the outset, virtually any adult who has no physical impairment or felony record can carry a gun in public in Florida. The weapon, however, must be concealed. After getting arrested and charged for openly carrying a .38 caliber handgun while walking alongside U.S. Highway 1, Dale Lee Norman challenged this concealment requirement, arguing that the Second Amendment protects the right to openly carry firearms. He insisted that the Supreme Courts decisions in D.C. v. Heller and McDonald v. Chicago, which created an individual right to keep a handgun in the home for self-defense, also grant him the right to walk around in public with his firearm in plain view.

To evaluate Normans claim, the court used the analysis deployed by virtually every federal circuit court to consider Second Amendment challenges. First, it asked whether the law burdens conduct protected by the Second Amendment based on a historical understanding of [its] scope, or whether it falls into a historically unprotected category of prohibitions. The court found that the law did not fall into a historically unprotected category and instead implicated the central component of the Second Amendmentthe right to self-defense.

The court then asked whether the open carry ban was so close to the core of this right as to prevent people from defending themselves. (Such laws, it asserted, are unconstitutional under Heller and McDonald.) Because Florida law regulates only how firearms are borne in public and still permits concealed carry as well as home defense, the court held that the open carry ban does not severely burden the right to self-defense.

Thus, the court found that the Florida law was not presumptively constitutional, and instead subjected it to intermediate scrutiny, asking whether it was substantially related to an important governmental objective. From there, the court easily concluded that the law passed constitutional muster. The states interest ensuring public safety by reducing firearm-related crime, the court wrote, is undoubtedly critically important. And the open carry ban substantially relates to this purpose because it helps to prevent deranged persons and criminals from grabbing an openly carried firearm and using it for malign purposes.

To my mind, this analysis is weak, as it overstates the scope of the Second Amendment from the start. The courts answer to the threshold questionwhether the open carry ban burdens historically protected Second Amendment conductis incorrect. There is no deeply rooted history of permissive open carry laws in the United States, and open carry bans should therefore be presumed to be constitutional. The dissenters, who believe open carry laws do have historical support, cite two antebellum state supreme court decisions affirming the right to openly carry in public. But as the majority noted, quoting an influential law review article, [t]he notion of a strong tradition of a right to carry outside of the home rests on a set of historical myths and a highly selective reading of the evidence. The only persuasive evidence for a strong tradition of permissive open carry is limited to the slave South.

Thats a critical caveat, because the tradition that supposedly establishes historical precedent for open carry was, in fact, part of the Southern slavery regime. White Southerners openly carried weapons to subdue, threaten, and punish rebellious or insubordinate slaves, and the law protected their right to do so as part of a legal system designed to suppress nonwhites. Obviously, this regime no longer exists; it was abolished by the 13th and 14th amendments. And in 2010s McDonald decision, the Supreme Court explained that the Reconstruction Congress wrote the 14th Amendment with the intent to apply the Second Amendment against the statesin an effort to protect newly freed slaves right to self-defense against violent white Southerners. It thus stands to reason that pre-14th Amendment case law meant to safeguard the subjugation of slaves has no place in the analysis of modern state gun regulations.

Had the Florida Supreme Court simply found, as a threshold matter, that the states open carry ban did not burden historically protected Second Amendment conduct, it couldve ended its inquiry there. Holding as much wouldve spared the majority from having to engage in a rather unconvincing intermediate scrutiny review. As the U.S. Court of Appeals for the 4th Circuit recently noted, firearm restrictions that fall outside historical protections for the right to bear arms are presumptively constitutional. Open carry has no firm tradition in our legal history, outside of two antebellum decisions designed to perpetuate the slave regime; that should be enough to justify the legality of open carry bans.

Still, in spite of these flaws, Thursdays decision is undoubtedly a major defeat for gun rights activists. It arrives just weeks after a 4th Circuit decision holding that the Second Amendment does not protect assault weapons, and less than a year after the 9th Circuit found that there is no constitutional right to concealed carry, either. (That practice, too, has been widely banned since the nations founding.) Because the Supreme Court clearly has little appetite to expand Heller and McDonald, these decisions will probably stand as the last word on the subject for now. And gun safety advocates can rest easy knowing that whatever few legislative achievements they can eke out in this political environment are unlikely to be toppled by the judiciary.

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Florida Supreme Court Rules the Second Amendment Doesn't Protect Open Carry - Slate Magazine (blog)

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Rep. Sean Roberts praises passage of Second Amendment … – Guymondailyherald

Posted: at 12:55 am

State Rep. Sean Roberts praised the passage of House Bill 1803, which prohibits the expenditure of public monies to oppose rights protected by the Second Amendment to the United States Constitution.

The bill passed out of the House Public Safety Committee by a vote of 7-6.

The right to keep and bear arms is one of the most sacred to our citizenry, said Roberts, R-Hominy. With the state facing a deficit of over $850 million for the upcoming fiscal year, the practice of spending taxpayer dollars lobbying for gun control needs to end. Allowing the expenditure of public dollars to erode our rights protected in the constitution is an affront to our freedom.

Rep. Jeff Coody, R-Granfield, a supporter of the bill, said, I am thankful that we can move closer to the day when the constitutional rights of Oklahoma citizens will not be trampled on by unelected bureaucrats whose salaries and expenses are paid with the tax dollars of those citizens.

The bill is now eligible to be considered by the full House.

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Rally Round The First Amendment – TV News Check

Posted: at 12:54 am

Speaking at the NAB's State Leadership Conference Tuesday, Senate Minority Whip Dick Durbin (Ill.) went after President Trump and his administration for their "unprecedented series" of attacks on the news media attacks thatculminated Feb. 17 with a tweetfrom the commander in chief calling "FAKE NEWS media" namely theNew York Times, NBC, CBS, ABC and CNN the "enemy of the American people."

"Turning reporters into enemies not just adversaries, but enemies is a strategy that strongmen use to silence critics and maintain power," Durbin said after cataloging the Trump assaults. "Their goal is to discredit the messenger. That way, when there is bad news, or news that contradicts the official line, people wont believe it.

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"Soon enough, people start to lose faith ... not just in the media, but in all of the institutions that hold a society together. They lose faith in the power of debate and elections to change anything. They become cynical and apathetic."

Well said.

The attacks have provoked a predictable public response from the targeted news media. Bring it on, they say. We are simply going to continue to do what we have always done, provide a check on the government by throwing as much light on its doings as we possibly can.

Rather than intimidate the media, the attacks have energized them and engendered waves of public support that can be clearly measured in "Trump bumps"to Nielsen ratings and paid subscriptions.

At the same time, the Trump thumps have provided an impetus for the news media to rally and redouble their collective efforts to preserve and perhaps expand their First Amendment rights. There is nothing like a hostile outside force in forging solidarity among the beleaguered.

On Jan. 17, representatives of more than 50 news organizations met at the Newseum in Washington to plota common strategy for strengthening news media. It was organized by the Reporters Committee for the Freedom of the Press and the American Society of News Editors and hosted by the Democracy Fund.

The journalists, lawyers and other media advocates discussed legal and legislative ways to insure access to government offices and information, protect whistle blowers from government retribution, protect themselves from frivolous libel suits and protect reporters from government harassment.

They also talked about the need to restore trust in the news media and floated ideas about how to do it.

I am happy to report that broadcasters were well represented at the "summit" by the Radio Television Digital News Association in the persons of Executive Director Mike Cavender and General Counsel Kathleen Kirby of the Wiley Rein law firm.

Cavender tells me to expect a full report from the organizers in the next week or two.

Whatever strategy emerges from the summit is just so much talk unless it wins the financial backing of newspapers, the national news networks and, yes, TV station groups. Legal defense funds, legislative initiatives and appeals to the public cost money.

It should go without saying that broadcasters need to support fully the RTDNA. In addition andCavender may hate me for saying this but broadcasters should also consider supporting other worthy organizations like Investigative Reporters and Editors.

I've been arguing that stations should eschew on-air commentary, especially on hot partisan issues, figuring that there is enough opinion out there and that it will only serve to undermine trust in stations' reporting. If a station's commentary is perceived as consistently liberal or conservative, its reporting may be dismissed as such.

However, I'm making an exception to that rule: the First Amendment. Stations should take to the air to defend freedom of speech and the press and argue for expansion of its rights and protections be that access to the dashcam video at the local police station or a federal shield law for whistle blowers.

A CBS affiliate should not allow the president to get away with saying that CBS News is "an enemy of the people." Ditto for NBC and ABC affiliates.

Stations must be careful not to preach or talk down to their viewers. That's how the national media alienated Trump voters. Stations need to listen to their viewers and win them over by convincing them that their interests are aligned, that press freedoms are ultimately their freedoms.

And it would be good to hear from the heads of the station groups, the ones who are always saying what swell jobs they do producing news and serving the public interest.

They can speak out in op-eds and in speeches before civic groups and at universities. They can direct the executives of the NAB and state broadcast associations to do the same.

I fully understand that the No. 1 job and responsibility of the station group executives is to make money, and so they have to be mindful of what they say. They have big issues pending before Congress and the FCC, notably ownership deregulation, the repack and ATSC 3.0. Criticizing the administration is not the way to get your way in Washington.

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Letter to the editor: 1st Amendment applies to govt – The Bakersfield Californian

Posted: at 12:54 am

I know the paper supplies the headline, but the headline of a Feb. 16 letter, First Amendment only applies to Americans, seems to be an adequate re-statement of the letters point. That point is wrong.

The First Amendment doesnt give anyone rights except as the result of the fact that it forbids the U.S. government from doing certain things; specifically, it provides in part that Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof Congress cant make such law whether it affects Americans or anyone else. It is a limitation on what we want our government to be able to do.

The Constitution was written at a time when European events had demonstrated clearly that getting governments involved in religion had horrible consequences the Thirty Years War, the Inquisition, the English Civil War, etc. Our Forefathers believed in freedom of conscience, freedom of thought, and freedom of speech from government interference. So do I.

Of course the U.S. Constitution cant guarantee the right of a person in another country to believe as he or she chooses, but neither can our government establish one religion or another as the basis for granting or denying immigration or visits. We told it "No!" in the First Amendment.

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In appeal, Lamar calls banner First Amendment right; Pittsburgh … – Tribune-Review

Posted: at 12:54 am

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Dash Becomes Third-Most Valuable Cryptocurrency Based On … – The Dash Times (blog)

Posted: at 12:52 am

The past 48 hours have proven to be quite intriguing for anyone involved in the Dash cryptocurrency. With prices spiking to a new all-time high yesterday afternoon, things got off to a good start. Albeit Dash has seen a small correction ever since, the price per individual coin still hovers around the US$46 mark. Dash is now the third-most valuable cryptocurrency in existence.

People who have been holding onto their Dash for some time were more than happy to see the recent price increase take form. With the value increasing by 450% over the past few days, it is evident the demand for privacy-centric altcoins is bigger than ever before. Dash has been around for several years now, yet never saw such a spectacular price increase up until the past two days.

All of this positive momentum has catapulted Dash to the third rank on Coinmarketcap. To put this into perspective, Dash is now the third-biggest cryptocurrency based on their market cap. At the price of US$46.09 per coin, the total market cap sits at US$328,782 million. That is quite an impressive feat and it allowed Dash to bypass Ripple, which has been the third-largest market cap for quite some time. Dash is still a long way removed from overtaking Ethereum, though, as there is a US$1.5bn gap between the two right now.

It is difficult to explain why the Dash price saw such an impressive price surge all of a sudden. There has been positive news, as Dash has been officially integrated into point-of-sale devices. In doing so, the manufacturers of these devices aim to make cryptocurrency payments more accessible to merchants and more common among consumers all over the world. That news alone would not propel Dash to the third spot on Coinmarketcap, though. It is evident some of the cryptocurrency traders and speculators had a role to play in all of this as well.

One Reddit user explained how the parabolic rise of Dash can be attributed to the Poloniex exchange. On this cryptocurrency exchange platform, users can lend out their Dash balance as a way to generate passive interest once the money is repaid. Using leverage to margin trade has been one of the primary reasons why Poloniex became the number one altcoin exchange in the world today. Users borrow cryptocurrencies from others and bet on which way the market will evolve.

Considering Dash saw a bullish trend, a lot of traders aimed to borrow funds to open long positions on the Dash price. However, some people were betting the Dash price would crash and opened short position, which requires a Dash balance to do so in the first place. With the demand to borrow Dash on the rise a lot of people expected a price crash the number of bitcoin flowing into the market exploded exponentially. It was impossible to open shorts due to lack of Dash, hence the bullish price trend could be maintained without problems.

With shorts no longer being able to match the longs opened on Dash, it was evident something had to give sooner or later. Shorters were forced to buy back into bitcoin at a loss, causing a short squeeze for Dash. A lot of people made good profit and suffered big losses as a result of this unexpected price movement. This is only part of the reason why the Dash price shot up, but it goes to show there was a lot momentum caused by speculators and traders. It is good to see someone explaining the situation in this manner, that much is certain.

In the end, the price momentum for Dahs has somewhat kept its flow going. A lot of people expected a retrace to US$20 per coin or less, yet that has not happened yet. Instead, the price has seemingly found a stable floor for now. Dash remains the third-most valuable cryptocurrency, which will not change anytime soon by the look of things. Whether or not this trend can be turned into long-term momentum for Dash, remains to be seen.

Header image courtesy of Shutterstock

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Column: Is the boom of bitcoin a bubble that’s about to burst? – PBS NewsHour

Posted: at 12:51 am

Making Sen$e columnist Vikram Mansharamani assesses whether the recent digital currencys boom is bubble about to bust. Photo by George Frey/Getty Images

The rapidly rising price ofbitcoinis leading many to question if the digital currencys boom is about to bust.Strategist Peter Schiff, for instance, recently warned todays bitcoin could be tomorrows beanie babies. As of this writing, bitcoin is up almost 30 percent in the past month and over 100 percent in the past year.It has been hitting new highs on an almost daily basis and recently crossed the $1,200 mark.So is there a bitcoin bubble about to burst?

As of this writing, bitcoin is up almost 30 percent in the past month and over 100 percent in the past year So is there a bitcoin bubble about to burst?

To try to answer this question, lets apply the framework for spotting bubbles that I articulated in my 2011 book,Boombustology: Spotting Financial Bubbles Before They Burst.The approach is based on the application of five lenses and generates a probabilistic assessment of a forthcoming bust.

Most mainstream economic theories utilize a supply and demand driven price determination model that generally results in pricestendingtoward equilibrium.I say tending because most serious scholars admit that behavioral and informational issues can distort the price at any one point in time, but there exists an overarching belief that such distortions are rapidly ironed out.Markets are, according to this view, basically efficient.Higher prices dampen demand, and lower prices disincentivize supply.

But what if thats not true?What if higher prices increase demand?Such a dynamic might arise for many reasons, but one eloquent explanation is the Theory of Reflexivity, as proposed by George Soros.Although it has many subtleties beyond the self-fulfilling logic that many ascribe to it, the underlying implication is that prices can and do tendawayfrom equilibrium.The result: booms and busts.

READ MORE: In the age of the Panama Papers, is Bitcoin technology the future?

So has the higher bitcoin price been accompanied by higher demand?Its unclear.The evidence is mixed.On the one hand, it sure seems that as news about and interest in bitcoin rises, so does its price. Its been seen as a safe-haven asset during times of elevated geopolitical, financial or regulatory riskand may even attract price-insensitivebuyers at those times.But on the other hand,the volume of trading has not gone up as prices have.And while volume is at best a crude proxy for demand, it tells us about the general activity level.Lens one: half-check.

Another telltale sign of a bubble is the presence of significant leverage supporting lofty prices.And while its unclear if bitcoin prices are bubbly or not, I dont see any evidence that leverage is fueling the potentially elevated prices. There are no futures contracts that enable large exposures with minimal collateral. There are no options that providede factoleverage.Sure, some investors may be utilizing other collateral to secure credit that is in turn used to buy bitcoin, but this is impossible to track.

Another telltale sign of a bubble is the presence of significant leverage supporting lofty prices.

But more importantly, perhaps, we can look at the amount of debt that has been holding up many of the countries that back traditional fiat currencies. (Hint: its not a small number!)In addition, the fact that printing presses around the world continue to print more and more money implies that traditional currencies are being debased at an alarming rate.With a fixed algorithmic release of additional bitcoins into the market and a cap on the total number that will ultimately be issued, the cryptocurrency represents a non-printable currency (similar in this respect to gold).Lens two: blank.

Overconfidence and new-era thinking are the hallmarks of my third lens, psychology. Whenever individuals develop a devout belief that its different this time, buyers beware.It is rarely different, and asset prices have never risen indefinitely.Rather, they generally go up and down, and in this regard, bitcoin prices are no different.

Its also clear that there is increasing agreement that cryptocurrencies are the new new thing and offer the promise of freedom from authoritarian manipulation of monetary instruments.Even investorPeter Thiel noted the promise of bitcoinby highlighting his own failure: Paypal had these goals of starting a new currency.We failed at that, and we just created a new payment system.I think bitcoin has succeeded on the level of new currency.

And like gold bugs, bitcoin believers tend to exhibit religious conviction in the cryptocurrencys ability to store value.They often go further, suggesting the amazing upside potential they exhibit.Internet analyst Henry Blodget has even suggestedbitcoins could be worth $1 millionper coin.In fact,CNBCs Brian Kelly described bitcoin asnot just digital gold it is a once-in-a-generation investment opportunity, similar to the internet, growing just as fast, if not faster its the internet of money.Lens three: check.

My fourth lens is politics, broadly defined to include both regulations and moral hazards.As with any asset, regulations can distort prices by either artificially increasing or dampening supply or demand.

Just think of what happened when political motivations to increase home ownership in the United States nudged more and more people into houses.Without the political incentives, prices may not have risen as handsomely as they did during the housing bubble.Further, the moral hazard endemic in the use of government sponsored mortgage finance enabled lenders to play a game of heads I win, tails you lose.If loans worked out, the lender profited.If it didnt, Fannie Mae or Freddie Mac bore the losses.

When it comes to bitcoin, are there any artificial government interventions that are supporting bitcoin prices?No.On the contrary, regulators are trying to discourage interest in bitcoin.Just look to China, where itsmajor bitcoin exchanges were effectively shut down last month by government officials.Butas noted by Elaine Ou inBloomberg View, even China cant kill bitcoin.Bitcoin prices briefly fell upon the news, but quickly recovered and marched higher.Theyre up more than 25 percent in the three weeks since China tried to control trading.

And when it comes to moral hazard, there are no signs of it in bitcoin land.No one bailed out those who lost millions whenbitcoin exchange Mt. Gox filed for bankruptcy.No regulator prevented or intervened to managethe governance disputes that arose on the bitcoin algorithm.Many bitcoin market participants are transacting with open eyes, fully aware of the risks of doing so.There is no FDIC protection, no Federal Reserve put.Lens four: blank.

Kolin Burges, a self-styled cryptocurrency trader and former software engineer who came from London, holds a placard to protest against Mt. Gox. Tokyo-based Mt. Gox was a founding member and one of the three elected industry representatives on the board of the Bitcoin Foundation. Photo by Toru Hanai/Reuters

An application of epidemic logic to the study of financial bubbles can help gauge the relative maturity of manias.If we analogize an investment hysteria to a fever or flu spreading through a population, the variables of concern to us would include the infection rate, the removal rate, and perhaps most importantly, the percentage of the population not (yet) affected.The last metric can be thought of as the fuel available to keep the fire burning.Once we run out of people to infect, so to say, the partys over.New demand will disappear.Prices will fall.

When it comes to bitcoin, the number of potential buyers (that is, those still vulnerable to infection) is very large indeed.To begin, its not particularly easy to buy bitcoin, and thats deterred institutional investors.Specialized exchanges, online wallets and the need to protect private keys create huge friction in transactions, keeping many potential bitcoin buyers away.There isnt an ETF, at least not yet.Stay tuned, however, asan ETF is in the works.And if approved (well know more later this month), theWall Street Journalnotesit might generate a buying frenzy with up to $300 million of inflows during the first week alone, a volume that dwarfs the currently traded daily value of any bitcoin exchange.

READ MORE: Alleged Bitcoin creator comes forward, but questions remain

And with a current market capitalization of around $20 billion, the bitcoin market is miniscule relative to its potential.Consider that the value of privately held gold is in the trillions of dollarsor that the global remittances (a potential use for cryptocurrencies like bitcoin) currently tally into the hundreds of billions of dollars. The bottom line is that bitcoin just isnt as widely held or used as it could be.There is still an enormous population of potential buyers waiting on the sidelines.Andin a recent Twitter poll conducted by investor Mark Hart, only 22 percent of respondents indicated that they were Max Long bitcoin, with 49 percent Planning to buy/add or Curious.Lens 5: blank.

So on my five-point scale, with five being a virtually certain bubble likely to burst imminently, bitcoin only registers one and half points.On the margin, this means that the stage may be set for it to become a bubble, but it doesnt appear to be one yet.It may one day become a full-blown bubble with high bursting risk, but the evidence doesnt suggest were there yet.Recall that government attempts to contain bitcoin have failed, anointing the cryptocurrency with a forbidden fruit status and driving new demand.Or that the possibility of an ETF or other investment instrument may emerge to ease the frictions of purchasing bitcoin.

While short-term price corrections are always possible, there are compelling reasons to believe the long-term outlook for blockchain-enabled currencies like bitcoin is bright.

And the promise of smart contracts inspires visions of unprecedented demand for digital currencies. In fact, just yesterday, a collection of large companies including Microsoft and JP Morgan announcedthey would be forming the Enterprise Ethereum Alliance.Ethereum is a distributed computing platform based on blockchain technologies that features the ability to design smart contracts.The cryptocurrency native to Ethereum isether, and its beencalledthe hottest new thing in digital currency.As the standard-bearer for cryptocurrencies, bitcoin will benefit from any attention ether generates. (Full disclosure: I own both bitcoin and ether.)

While short-term price corrections are always possible, there are compelling reasons to believe the long-term outlook for blockchain-enabled currencies like bitcoin is bright.If youre looking for beanie babies, you best look elsewhere.

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Column: Is the boom of bitcoin a bubble that's about to burst? - PBS NewsHour

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Time to Be Long Bitcoin (BTC) – Investopedia

Posted: at 12:51 am

Time to Be Long Bitcoin (BTC)
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I jumped on board the Bitcoin train last year and added it to my research platform. Our clients really enjoy it, whether they are actively trading it or just interested in the product. But of the biggest reasons why I decided to start including it in ...

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Bitcoin: Can RBI ignore the elephant in the room? – Economic Times

Posted: at 12:51 am

By Arnav Joshi

Virtual currencies like Bitcoin are all the rage in FinTech, and could potentially transform global commerce in the years ahead. Users are adopting them in the thousands each day and the value of trade in these currencies is witnessing unparalleled growth.

The world over, regulators are working out carefully-crafted regulations to foster Bitcoin growth. In India, however, even with the new cashless push by the government and existing Bitcoin trade spiking post-demonetisation, the Reserve Bank of India (RBI) continues to shy away from recognising and regulating virtual currencies.

On February 1, the RBI issued a yet another cautionary press release, on the back of an earlier one issued in December 2013, warning users of a risk they are likely to already be aware of -- that it (the RBI) does not regulate and has not licensed any virtual currencies in India, and anyone using them does so at their own risk.

A month later, on March 1, RBI Deputy Governor R. Gandhi raised concerns over virtual currencies, saying they pose potential financial, legal, customer protection and security-related risks.

While the central bank seems to be insulating itself from the repercussions of these currencies remaining unregulated, their use continues to grow exponentially across the world, including in India.

As of an August 2016 (pre-demonetisation) estimate, the number of Bitcoin (the most prominent of several virtual currencies) users in India stood at 50,000 and growing. India now also has a large number of prominent Bitcoin exchanges such as BTCXIndia, Coinsecure, Unocoin and Zebpay. Globally, by some estimates, Bitcoin users alone could breach five million by 2019.

The latest red flag from the RBI may well have been prompted by the recent surge in the price of Bitcoin on Indian Bitcoin exchanges post-demonetisation. Bitcoin is freely tradable currency, and has its own exchanges (including in India) where users can sign up and speculate, buy and sell Bitcoins for other currencies (such as the rupee).

After the cash ban, Bitcoin was quoted to be inflated 20-25 per cent over cost. As of March 2, Bitcoin was trading at Rs 90,000 to a single Bitcoin. In October 2016, this value was Rs 40,000 to a Bitcoin.

The question that arises then is how long can the RBI afford to adopt a hands-off approach to virtual currencies, when regulators elsewhere are adopting proactive measures?

The RBI's research wing, the Institute for Development & Research in Banking Technology, issued a white paper on the applications for blockchain technology in the banking and financial sectors in India in January 2017, which acknowledges the prominence of virtual currencies, but steers towards the underlying distributed ledger (blockchain) technology, rather than virtual currency regulation.

A large number of countries, not just in the West but in India's own neighbourhood, have either adopted or are close to adopting virtual currency regulation in some form. These include China, Russia, Singapore and the Philippines, which issued guidelines for virtual currency exchanges as recently as January.

Interestingly, the precursor to regulation in a number of these countries were warnings similar to those issued by the RBI. However, these warnings largely came around 2013, at a time when the understanding of the technology and the use of virtual currencies was much lesser than it is today.

In 2017, when users, trading and payments in these currencies are growing and maturing faster than ever, the warn-watch-wait approach simply will not work.

There are a number of downsides to not bringing in regulation when virtual currency use in India is still modest. Prominent among these is that regulation which kicks in when products and technologies have become systemic will invariably cause friction between regulators on the one hand, and businesses and users on the other, requiring stakeholders to make slow and possibly expensive changes to the way they transact.

Another issue is the key role regulation plays in consumer awareness and security. While the RBI may sleep soundly having issued its caveat emptor, given the attractive investment opportunity and ease of use and access virtual currencies offer, users are likely to throw caution to the wind and invest anyway.

The clear downside to this is that investors will likely fall prey to unregulated and unscrupulous Bitcoin exchanges and wallet operators (similar to a Paytm or Mobikwik, but exclusive to storing Bitcoin). Without any oversight, these operators rely on self-regulation. They could have severe gaps in data security, could charge exorbitant interest and transaction fees, and in a worst-case scenario, disappear with investor money altogether.

More importantly, the jury is still out on whether virtual currencies can be used to pseudonymously finance crime, including terrorism, and given the sensitive security scenario in India, it is important for the government to understand, and for the law to control, who can buy them and what they can do with them. As transactions grow, so will the chances and potential for virtual currency-related fraud.

Legal scholars Jack Goldsmith and Timothy Wu have said "government regulation works by cost and bother, not by hermetic seal", which appears to be the line the RBI is taking on virtual currencies.

With emerging technologies, however, especially those as radical as virtual currencies, governments are increasingly learning that the cost and bother of reactive regulation can be substantially greater than proactive regulation.

If the Indian government is serious about its cashless drive, it will have to consider virtual currencies as an integral part of the panacea being touted for our archaic economy.

It is up to the government and the RBI to lead the way by bringing forward-looking regulation for virtual currencies sooner rather than later, because there is already much catching-up to do.

The writer is a Senior Associate at J. Sagar Associates and advises internet and emerging technology clients. Views expressed are personal. He can be contacted at arnav.jo@gmail.com

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Bitcoin: Can RBI ignore the elephant in the room? - Economic Times

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