India! I dare you to be rich

Category Archive: Current Affairs

Is there something fishy about Ramdev and his “empire”? #3

Now for a broader set of issues re: Ramdev's "empire". Leaving aside his support for black money in elections and his waving away the issue of audit, I now have verbal information that his organisations are violating India's rules and regulations and generating black money for the relatives of Ramdev. I had heard such an allegation from one of Ramdev's relatives last year in relation to Yashpal Shastri (Ramdev's brother-in-law). Such allegation being hearsay, however, I was unable to act, nor had any time to pursue. 
 
But in the recent past I've heard much more – including some truly scandalous things. Leaving aside the scandalous things, let me focus on corruption/ black money allegations.
 
"Standard" allegations
Some allegations are "standard" in that these have already been widely published, e.g.
  • taxes are being evaded on what are primarily commercial activities (several cases pending with tax authorities on this count)
  • excise duty is being evaded through false declarations
  • violation/s of FEMA (cases pending with the Enforcement Directorate)
  • the issue of illegal land deals (Telelka). These include allegations that his people forcefully acquired land from farmers
  • allegations about running over 200 companies (e.g. Wikipedia).etc. 

New allegations

New allegations include that:

1) a number of suppliers & creditors are not paid their dues, particularly many small farmers.

2) the Government of India granted about Rs. 50 Crores for promoting a food processing business hub in the Food Park, Patanjali. However, these funds have allegedly been used for activities unrelated to such promotion, thus the grant has allegedly been misused. 

3) Manipulation of financial records: All financial matters have been handled by a single agency (Anil Ashok & Associates) acting as internal and external auditor for the past many years. Debts are a particular tricky issue. Relatives of Ramdev are allegedly key beneficiaries of such manipulation. Money laundering is allegedly a key activity in Ramdev's "empire".

The only way I can validate these allegations is through transparency and openness. I invite Ramdev and his group to publicise their side of the story through evidence and data.

THE STORY I'VE BEEN TOLD BY RAMDEV

Ramdev told me that he does not own a single rupee nor any land. All accounts of the entities associated with him (managed by independent Trusts or companies, through Balkrishna) are regularly audited and provided to necessary authorities. I was told that as a charitable Trust, the Bharat Swabhiman Trust had received authorised income tax exemptions from government. The work it does is entirely charitable. No one is charged to attend any Bharat Swabhiman camp.

However, I've now formed a strong suspicion that much of the information Ramdev told me was false. I need to physically see the relevant documents.

Continue Reading

Is there something fishy about Ramdev and his “empire”? #2

In this post, as discussed in the previous post, I am publishing my email of 22 December 2012, sent after detailed discussions with Siddhartha Ananta in Patanjali, seeking information on the financial status of Ramdev's organisation/s.

I held many meetings with Ramdev re: formation of a broadly liberal political party. Ramdev agreed to invite a few FTI members as part of this process. As part of this we held a meeting with Ramdev and Acharya Balakrishna in Balakrishna's office chamber. The matter of an independent financial audit organised through FTI was discussed in detail. We suggested hiring a Big 4 auditor, the results of which would be presented to India through a group of eminent people in a press conference in early 2013. There was not much interest among Ramdev/ Balakrishna in such an audit. We were referred, instead, to publicly available audit reports – which did not really provide the details I had sought. 

By now, though, based not just on this lack of provision of financial information but on the basis of further new information, I've formed a STRONG SUSPICION of financial (and other) impropriety in Ramdev's empire. I don't have direct proof yet but let me start by publicly documenting the information/ allegations I have, and seek input from those who know. I will try to pursue this data request more formally from Ramdev etc. in the coming days/ weeks.

===MY FORMAL REQUEST FOR FINANCIAL DETAILS TO RAMDEV, SENT ON 22 DECEMBER 2012===

Dear Siddhartha
 
As discussed, 
 
1) Can the published annual reports and balance sheets of the past three years be provided to [FTI] as soon as possible?
 
2) Are you able to request the relevant officials in Patanjali Vidyapeeth to prepare a draft document on the following points:
a) A one or two paragraph summary of the financial system including number staff (for each Patanjali entity)
b) Details of lodgement of accounts for past three years with the government
c) Taxes paid in these last three years.
d) Chronological list of government allegations and summary of findings
e) Statement made in Parliament
f) When  were 7 truckloads of data sent to government, and what was the result?
 
This information may take a few pages, but will be worthwhile in assessing next steps. This information can be compiled by 27 December.
 
3) Also, it would be desirable if a meeting could be organised  between a couple of senior finance officials and [FTI]  on 29 December.
 
Regards
Sanjeev
Continue Reading

Is there something fishy about Ramdev and his “empire”? #1

I'm increasingly coming to a view that there is something fishy about Ramdev and his empire. I am not yet 100 per cent sure, but there is enough information for me to start asking questions. 

First, let me publish the emails I wrote to Jaideep Arya and Siddhartha Ananta of Bharat Swabhiman Trust earlier this years with a request to get Ramdev's direct comment regarding his support for a BJP candidate whose black money was allegedly caught by the ECI. No such clarificaiotn or comment has yaet been received. This is a matter of ongoing concern. 

Second, when I decided (at Ramdev's two requests over phone) to travel to India to meet Ramdev in December 2012, I was aware of numerous allegations re: his empire. Therefore I asked for a set of financial and related information be provided to me so we (FTI) could to assess the facts before supporting Ramdev. After discussions with Siddhartha Ananta, I wrote an email in December 2012, seeking information to assess allegations of financial impropriety. Despite a (later) detailed meeting with Ramdev and Acharya Balakrishna on this issue, no information was provided by BST. I was, instead, asked to look at their website and provided verbal assurances. The issue never went away, though, and it is now time to publish that email. I do so in the next blog post.

Third, I've been getting DIRECT information from various sources about scandalous and black money activities in Patanjali. It is time, therefore, to try to assemble some of these allegations and information. In the third blog post in this series I'll publish some information that is likely to be true (but for which substantiating data is not readily available). I aim to pursue these allegations till I get to the bottom of things. If these allegations are true (I'm now confident based on information from HIGHLY CREDIBLE AND RELIABLE sources that they are), this will mean that Ramdev has been taking the country (including his millions of followers) for a ride.

Help me get to the bottom of this by providing any information you may have.

POST NO. 1: EVIDENCE REGARDING RAMDEV SUPPORTING BLACK MONEY

In April I raised serious objections to Ramdev's behaviour at a public event in which he protected a BJP candidates who was using black money. I also wrote this.

1. On 18 April I wrote to Jaideep Arya seeking clarification:

I'm upset beyond imagination at what happened in Alwar yesterday. I'd ask all GOOD people to abandon Ramdev at once. He is clearly CHEATING India.
 
He says one thing but does another. But worst is that he pretends to oppose black money but DIRECTLY SUPPORTS black money.
 
 
If you do not leave Ramdev at once I will assume you are part of the racket of misleading India.
 
Please speak out publicly also regarding anything that you may know about Ramdev's involvement in black money, since I've heard too many things about him, all of which can't be false – particularly given what happened in Alwar yesterday.
 
You know also very well that my strong attempts to get Patanjali audited by a group of eminent people was not acted upon by Ramdev/Acharaya.
 
Anyway, just to make clear, from now on Ramdev is in MY ENEMY CAMP – of those who have been destroying India. 
 
If Ramdev was serious about reform and integrity, he would have done what he clearly agreed with me: to set up a party based entirely on integrity. But he chose to support mega-corrupt BJP. 
 
Now he has been CAUGHT. He was perhaps afraid to work with me since I'd have caught out his lies. But no one can hide from the truth. Now the entire world knows what he is – a FAKE "opponent" of black money.
 
LET'S ALWAYS FOLLOW THE STRICT LINE OF TRUTH AND INTEGRITY else we can't help India. Please leave Ramdev and ask all good people to leave him.
 
2. Jaideep Arya replied on 18 April:
Pujya mahant chand Nath ji complaining to Pujya Swami ji about the Congress Conspiracy about disturbing the routine election Parchar
Head-Office
 
3. I wrote back to Jaideep:

No, Jaideepji. Mahant Chand Nath said CLEARLY that election funds had been caught. 

अच्छा एक किसी नें कहीं से पैसे ल्यानें में बड़ी दिक्कत होती है. हमारे पकड़े भीगये.
 
Only black money is caught. Ramdev, instead of immediately acting to challenge him for using such black money, asked him to keep quiet.
 
After the meeting, when press asked Ramdev, he DENIED even talking about money.
 
This is a clear case of Ramdev supporting BJP black money.

4. Jaideep Arya replied:

But EC authorize to spend 70 lacs in each constituency.
Head-Office

5. I replied back

No, no, that's not the point. I am fully supportive of white money in elections.

But this is about the fact that BJP is using black money. Only black money is caught, but instead of punishing this candidate for using black money (after he admitted that funds were caught), Ramdev protected him by (a) effectively asking him to discuss further in private and (b) denying to the media that any discussion took place regarding election funding. That second lie gave away everything. 

If he had any explanation (like you are trying to give) he should have given it on the spot.

Anyway, I have said what I have to say. I've also reported to the Election Commission to punish the candidate.

If you think (after reviewing the tape) that Ramdev was right, please carry on. I will know where Ramdev's team stands on the issue of black money. Please listen very carefully to what Mahant Nath said and then what Ramdev said. This is pure "mili-bhagat". Collusion in use of black money in elections.

Do not sully your own reputation, is my recommendation.

6. Jaideep wrote

"Mahant chand Nath ji complaining to @yogrishiramdev about D Congress Conspiracy to complain EC time and again that He had spent Money in excess in Parchar Parsar
" Take this complaint as Conspiracy"
it means u r Biased,adament , u r not justifying the facts even.
Head-Office

7. I then wrote (19 April)

I've now been provided the precise word used by Ramdev: "bawra" – to describe Mahant.

So the conversation now goes like this (I've updated my blog):

BJP candidate Mahant Chand Nath says to Ramdev:

अच्छा एक किसी नें कहीं से पैसे ल्यानें में बड़ी दिक्कत होती है. हमारे पकड़े भीगये. 

 

Translation: "Well, we are facing lot of problems in getting money [to this constituency]. Our people were also caught [by the Election Commission]."

To which Ramdev replies in a whisper: 

आप बात करना बंद करो, बावरे हो क्या? यहाँ मत करो. [Laughs sheepishly]

Translation: "Don't be an IDIOT. Stop this conversation now! [Don't talk such things in public]."

 
I have written to Jaideep Arya and Siddhartha Ananta (also copying this email) but Jaideep wrote (compiled from his emails):
 
1) Pujya mahant chand Nath ji complaining to Pujya Swami ji about the Congress Conspiracy about disturbing the routine election Parchar
 
2) "Mahant chand Nath ji complaining to @yogrishiramdev about D Congress Conspiracy to complain EC time and again that He had spent Money in excess in Parchar Parsar
" Take this complaint as Conspiracy"
it means u r Biased,adament , u r not justifying the facts even.

3) Jaideep also tried to justify that "But EC authorize to spend 70 lacs in each constituency."

Jaideep's defence of Ramdev doesn't fit the facts. Here's why:
 
a) This is NOT about legal 70 lakhs. That kind of (legal) money is never seized. Only black money is seized. A party whose money is seized normally keeps quiet for fear of jail. But in this case Mahanta is admitting to HIS black money being seized.
 
b) There is NO reference to any Congress disturbing any routine "prachar". This is about difficulties in bringing MONEY into the constituency.
 
c) This is NOT a "complaint" by anyone. This is DIRECT discussion from the horses' mouth. And both horses then go and deny that such a conversation even took place. That was the give away.
 
So Vachaspatiji, with all due regards to you, I've done my due diligence with Ramdev's team (I can't call him Swami any longer), and the defence being provided to me is absurd and irrelevant. Instead, I'm being called "Biased,adament , u r not justifying the facts even."
 
Jaideep doesn't understand that I'm nobody's fool. I will ask even God 100s of questions before agreeing that an alleged God is God. So far no one has tried coming to me, claiming to be God. Prove to me that I'm wrong, and I'll change my mind. Don't attribute bias to me. Don't call me adamant. 
 
But this is as conclusive as any evidence goes that this was about black money. This is NOT about any Congress conspiracy and this is NOT about legal 70 lakhs.
 
Over to you. You can contact Ramdev and ask him to publicly tell me that I'm wrong. I dare him to do so. I KNOW he can't, and won't. There is NO other explanation.
 
If he IS able to prove to the whole country that this he does not support BJP's black money, I'll eat a humble pie and publicly apologise. 
 
But he forgets that I have heard directly from a BJP person who personally distributed 35 lakhs in cash in ONE night in one small section of Mumbai slums (in 2009). So I KNOW that BJP uses crores of black money in elections. This is not a myth. This is true. How, then, is Ramdev supporting BJP? His position is totally untenable. He is NOT an enemy of corruption but only an enemy of Congress. 
 
I, however, am an enemy of corruption – regardless of who does it. And anyone who supports the corrupt or consorts with the corrupt is also my enemy. So Ramdev is now in the enemy camp.
 
8. And further I wrote:

Let me add that I feel particularly bad about the whole Ramdev saga since it was HE who contacted me (twice) over phone and persuaded me to come over to India to discuss a political party.

I then not only took leave, but spent my own money to meet him. 

And then I spent nearly 6 months of effort to build a party that we had agreed upon. The amount of work put in was huge. Not just me, nearly 10 of us on FTI. And Varun Arya.

My TIME, my MONEY, my EFFORT was all contingent on one thing: That Ramdev is a truthful, good man. I heard many stories against him so I asked that his organisations be audited. That request didn't go anywhere.

The sense of betrayal I now feel is visceral. Without asking me, he suddenly supported BJP. And now, he is actively supporting BLACK MONEY that is always used by BJP. And why did he lie to the press when caught out? 

Not the signs of an honest man. The man is unreliable.

IN SUMMARY (FOR THIS POST ONLY)

Ramdev has not contacted me, to date, to clarify and provide the necessary evidence in this regard, so this matter must remain open. Now (in the next two posts) for other info, as discussed in the introduction to this post.

 

Continue Reading

Sorry, Modi, you can’t hide Amit Shah’s criminality. Censoring newspapers doesn’t work – any more.

Amit Shah and Modi seem to be working overtime to remove all traces of Amit Shah's criminality. This article published by DNA is no longer available. There is no explanation provided by DNA. The only logical implication is that this article – which was widely shared on social media – was inconvenient for the Modi government, which must have asked DNA to remove it.

But censorship doesn't work today. Thanks to Google. And the internet.

I'm re-publishing the copy retrieved from Google cache.

THE MORE THEY TRY TO HIDE THE TRUTH THE MORE IT WILL SPREAD.

Thank you, Google!

ORIGINAL URL: http://www.dnaindia.com/analysis/standpoint-a-new-low-in-indian-politics-2000913

GOOGLE CACHE.

The full text below, followed by the image copy. Let there be freedom of the press in India. Already one of the least free countries in the world, Modi wants to make India a basket case.

[Opinion] A new low in Indian politics

Wednesday, 9 July 2014 – 5:11pm IST | Agency: DNA

Late last week, a special CBI court adjourned the bail application of Amit Shah in the Sohrabuddin and Tulsi Prajapati fake encounter cases, accepting his excuse that he was engaged in political work in New Delhi. Shah, 49, the first serving Home minister of a state to have gone behind bars in a criminal case of murder and conspiracy had a legitimate reason to skip court hearings. He was presiding and taking part in day-long meetings in Delhi with senior RSS leaders and BJP functionaries who were all set to seal his fate as the next BJP President

There is a significant back story to his exemption which did find its way as a small snippet in the media but needs to be brought to light as Shah, the man who waved the magic wand for BJP in Uttar Pradesh, the PM’s confidante and the number two in the government now takes over the reins of the party. Amit Shah had twice in the past sought exemption from personal appearance citing political work, but the then CBI judge JT Utpat had found his excuse inadequate for the court to grant him relief. On June 20, while hearing the application, Utpat allowed the same but made a scathing remark “Everytime you are giving this exemption application without assigning any reason,” he told Shahs counsel. In less than a week, Utpat was transferred to a Pune court before he could preside over Shahs discharge application. Shah managed his way out with a tried and tested formula of transferring judges, practiced brazenly in his home state of Gujarat through his tenure as Home Minister.

As a journalist covering Gujarat extensively since 2005, as someone who exposed Shah’s role in the fake encounters in the state and who can claim to have knowledge of his political trajectory, I would not mince my words in suggesting that by appointing Amit Shah as the president of the party, the BJP has hugely disrespected the law of the land and signalled an all time low for the criminal justice system of India. For the cases against Shah are for crimes so gruesome that the cloak of political astuteness will be too short to cover it.

In its chargesheet filed in the Sohrabuddin fake encounter case, the CBI which had been investigating the case under the watchful eye of the Supreme Court of India had not just named Shah as one of the key accused and conspirators but also named him as the head of an extortion racket which involved underworld thugs, politicians and businessmen. In its submission before the apex court bench of Justice P Sathasivam and Justice BS Chauhan, the CBI stated that the minister was in cahoots with senior cops from Gujarat including the likes of DG Vanzara and Abhay Chudasama who had been sentenced for cold-blooded murder – concluding that Shah was a hardcore criminal. Shah was also chargesheeted in the murder of Kauser Bi, the wife of Sohrabuddin who according to the official papers was raped, sedated, killed and her body burnt and thrown in a river.

One could have well debated the merits of the CBI chargesheet and read political motives but for the fact that the Supreme court itself gave CBI the sanction to arrest Shah at the same time, coming down harshly on the Gujarat state police investigation led by the then top cop Geeta Johri for going slow and misleading the courts. If the SIT verdict on Narendra Modi’s role in the Gujarat encounters is to be held as the final word, by virtue of it being monitored by the apex court, it is baffling then that Narendra Modi who promised clean and transparent governance to this country and setting up fast track courts to look into cases of criminal charges against politicians has turned a blind eye to Shah’s criminal past.

Shah has been Modi’s confidante since his days as a pracharak in Gujarat and Maharashtra. With Shah's induction on the national scene first as the General Secretary of the BJP and now as the BJP President, Modi has risked his own political image for the sake of his ally and friend who has put to shame the best political pundits and strategists from North India with his shrewd manoeuvring. In the coming days, the party will have to prove its popularity not just in the by-elections of Uttar Pradesh but also in the forthcoming Assembly Elections in three states, the most significant being the battle for Maharashtra. Party insiders have stressed on Maharashtra being a prestige battle for Modi whose party swept the Lok Sabha elections a couple of months ago. Going by the minutes of the internal meetings held between Modi, Shah and senior heads in the BJP and the RSS, the Prime Minister has silenced his detractors in the party who were against Shah's elevation citing his ability to churn out big numbers.

Many in the Gujarat BJP believe that Modi has been under tremendous pressure by Shah to return the favours he has allegedly bestowed on his mentor in the last two decades of their association. It’s a well known fact that during Modi's rebellion against former Gujarat Chief Minister Keshubhai Patel and in his fight with the ex-Home Minister of Gujarat Haren Pandya, it was Shah who stood firmly by Modi's side galvanizing the cadres and leaders in favour of his boss.

As the second in command in the Modi dispensation, the youngest minister in his cabinet who held charge of twelve ministries including the powerful Minister of State for Home, Shah single-handedly thwarted all trouble that came in the way of Modi with his office getting the infamous tag of the “dirty tricks department of the CM”. It was under his tenure as Home Minister that the Gujarat police went on a spree of fake encounters in the state – holding regular press conferences for the media with the bodies of the alleged assassins on display. The officers would claim that the Gujarat CM was under threat from jihadists who were out to assassinate the man who brought back Hindu asmita in Gujarat.

While the chief minister managed to leave unscathed during the investigations of most of the encounters which were later pronounced as fake, Shah found himself listed as the prime accused in three encounters, his role in the other two being probed by the CBI with investigations in the case still on.

Another major dent in Shah's image came with his alleged involvement in the Snoopgate scandal, in which he is heard instructing one of his key lieutenants – IPS officer GL Singhal who was then incharge of the ATS, to carry on surveillance on a young woman. The tapes which were released late last year created a furore after it became obvious that Shah as the Home Minister of the state was using state machinery to snoop on innocent civilians, monitoring their moves. In this particular case, a young woman whose movements, including aspects of her personal life were being reported to the CM on a daily basis.

With such serious criminal charges against him, has Modi denigrated the position of the party president by handing over Shah the reins of the party. Would it now be safe to assume that Prime Minister Narendra Modi acted against the interests of the judiciary by rejecting the nomination of Gopal Subramaniam as a Supreme court judge as he was also the amicus curiae in the Sohrabuddin fake encounter case. Ever since the Prime Minister assumed office, ex-CBI directors including Ashwini Kumar and AP Singh who were at the helm of affairs in the CBI during the investigation of the encounters, find themselves being at the receiving end of Shah's wrath. While Kumar has stepped down as governor of Nagaland, AP Singh is reportedly under pressure to step down as member of the UPSC after the Income Tax department served notices to him and his family members in an investigation into alleged tax evasion by meat exporter Moin Qureshi.

These could all well be coincidences if one were to take a larger liberal view of the developments including the transfer of 89-year-old ailing governor of Gujarat Kamla Beniwal, who under her tenure locked horns with Modi and Shah over the appointment of Lokayukta in the state. But even if one were to dismiss these actions against officials, lawyers, judges who played significant roles in the criminal justice process involving Amit Shah as conjectures, will it not be pertinent to suggest that by appointing Shah as the BJP President, Modi has acted in contradiction to his promise of a free and fair government, which will have no space for vindictiveness. Hasn't Modi and the BJP under the guidance of the RSS just made the first attack on the principle of clean governance on the basis of which the party came to power? Prime Minister Narendra Modi needs to answer this one.

Rana Ayyub is a journalist and a writer. She tweets at @RanaAyyub
The opinions expressed in this article are the author's own, and do not necessarily reflect the views of dna​.

[click image to view a larger copy]

Continue Reading

What advantage do Bitcoins possess that cannot be secured through the purchase of gold?

A reader asked this question today (the  title of this blog post).

My response:

Once risks to its survival are perceived to have reduced (i.e. regulators have failed to stop it) then it will behave like any other risky asset with limited circulation (e.g. like a Picasso painting). Total number of bitcoins are limited by design, and can only be 'mined' (through grunt force of computers) at incrementally higher and higher cost. This further imposes a limit on the total number that can be put into circulation.

Unlike a central bank that can increase money supply, or gold – more of which can be found in the future – Bitcoin supply is fixed for ever.

In the long run, therefore – assuming regulators can't shut it down one day – Bitcoin will perform better than gold as a store of value. The more the people who buy Bitcoins, the greater its value becomes. There is an in-built virtuous cycle in Bitcoin design.

People may prefer to park their dollars in Bitcoins instead of in banks, since Bitcoins should, on average, grow in value over time.

However, Bitcoins are not free of risk – at least for another couple of years. But once risk is further reduced, there is only an up-side.

There is also an advantage to Bitcoin in comparison to gold or a painting by Picasso: that one doesn't have to hold Bitcoin physically. These can be parked in any Bitcoin exchange at very low transaction cost.

Similar properties apply to all alternative cryptocurrencies. However, since Bitcoin is driven by "belief", people have voted with their money for Bitcoin and are abandoning other cryptocurrencies. This doesn't mean that the risk of the "herd" moving to another currency doesn't exist – which will reduce the value of Bitcoin. However, like Facebok has now comprehensively taken over the social media space and eliminated all other rivals – due to "herd" preference, so also Bitcoin seems to have become the cryptocurrency of choice of the "herd".

[LATER]

Further, here is an example of ongoing regulatory risk:
http://online.wsj.com/articles/eu-cautions-banks-over-virtual-currencies-1404475980

It is possible, though, that such international regulations can provide a large boost to the value of these currencies.

My sense, though, is that these currencies can't be regulated in any meaningful way.

Continue Reading

My experiment with Bitcoin and musings on its future: From negative to neutral, even a little bit positive.

Despite my objections to Bitcoin and my negative views about it (see this and this), I think Singapore is right to undertake due diligence to understand it properly.

Singapore keeps pushing ahead while the West stagnates: there is a culture of deep innovation in its public sector (which is essentially private). Singapore does not ignore new technologies. It tries to understand them and take advantage where possible.

Following this lead from Singapore, I've also put a tiny bit of money into bitcoin and one other alternative currency, so I can understand what is going on. I also managed to read up quite extensively about these alternative currencies. This is money well spent to get a better understanding of cryptocurrencies.

My concerns are largely regulatory, and many of these concerns still remain. But I find that regulators have had a very long time and done NOTHING about Bitcoin. Therefore, this has now grown too big to deal with. It is a REAL thing, that needs to be given real consideration.

LESSONS TO DATE:
I've purchased these cryptocurrencies through a Hong Kong based exchange. There was very diligent validation of identity by the exchange. That should help lower money laundering risk. I had transferred AUD through my bank, so this is a fully recorded transaction.

BUT I understand that customers of the exchange can plunk in their bitcoins directly into the exchange (i.e.not through banks). These bitcoins, being totally anonymous, could have been purchased/ mined in any number of ways unrelated to the regulatory system – including through drug/corrupt money.

My question is: how can any regulator even possibly deal with this issue? Maybe that's why they are sitting on the sidelines, confused about what they can do.

The exchange can be regulated and can check ID, but how can anyone identify "black-money" bitcoins? All bitcoins look the same, like drops of water in the ocean.

I can report the following:

1) There is THICK trading – very active trading of bitcoins in the Hong Kong based exchange. Spreads are very small, as a result. Trading is instantaneous. 

2) There is very THIN trading in alternative currencies: only a few of them are convertible into dollars, only very small amounts are traded, with very wide spreads. 

3) Most alternative currencies that are traded (very few are) have been declining in value over the past many months.

4) Bitcoin volatility has dramatically reduced over the past few months.

5) Bitcoin market capitalisation is around $8 billion compared with the nearest competitor, Litecoin, at $200 million. 

6) Hundreds of thousands of businesses accept Bitcoin, compared with almost none for most others.

This indicates:

- Just like Facebook displaced Myspace and Okrut comprehensively and totally, so also the "eyeball" factor, the thick trading factor, and the assurance that the black money and corrupt industry of the world will always act as a "base" for the bitcoin market, have meant that alternative currencies are being wiped out, even as Bitcoin is now becoming more of a "store of value" and more likely to be used/traded across the world. Alternative currencies are fighting a losing battle. This is not about the First Mover advantage, but about the acceptance and hence liquidity and credibility of the market.

- There is not much to distinguish between various crypto-currencies, some minor technical matters notwithstanding. As commodities, it is now merely a matter of consumer preference (thickness of markets) that will dictate which one "wins".

- Regulators have had plenty of time to resolve the money-laundering and black-money issues that plague Bitcoin, but they simply CAN'T. They've thrown up their hands. Therefore, bitcoins are likely to flourish regardless of what regulators do.

- Bitcoin has started behaving more like an asset (an appreciating store of value) than currency. I don't have a digital wallet yet and don't see the need to create one. That will require me to hold bitcoins at my own risk and I could lose them if I lost my digital wallet. Much better to store them in a digital exchange, like an asset.

- As bitcoin is increasingly seen by more people as an asset that increases in value, demand for bitcoins could increse, leading to a self-fulfilling explosion in value. THE MORE THE PEOPLE THAT BUY BITCOIN, THE MORE THAT WILL BUY IT, AND THE MORE ITS VALUE WILL INCREASE.

- Bitcoin is increasingly likely to become part of people's diversified portfolios.

- The moment any two or three governments "validate" bitcoin (through regulatory means), its "desirability" will radically increase, thereby causing a RUSH TO BUY, which will dramatically increase its value, and therefore desirability.

- Regulators are likely to realise that they best way to regulate Bitcoin is to work out agreements with Bitcoin exchanges to share data of their citizens. E.g. the Hong Kong exchange could provide data to Australia about my purchase – and particularly when I sell Bitcoin. Regulators will increasingly seek to enforce money laundering and other laws at the point when Bitcoins are converted into dollars, being largely unable to control conversion from dollars into Bitcoin.

- Bitcoin – once it has reached 'critical mass' – is unlikely to lead to a 'run on the bank' – i.e. panic sale, which is a relatively common problem with paper money.

- People are more likely to want to be paid salaries in Bitcoin once it has become established as an alternative currency-asset (it has both properties).

CONCLUSION
If regulators aren't able to "ping" Bitcoin rather quickly now (they've already taken too long), then I expect Bitcoin to become a very disruptive technology. Its impacts could be very far reaching and completely unprecedented. Vast economies could come into existence that never convert Bitcoin into dollars, and trades occur through internet/electronic means, totally invisible to regulators. E.g. if people in the peer-to-peer (e.g. TaskRabbit/ Uber) economy prefer to be paid in Bitcoin and more businesses accept Bitcoin as payment, which means many transactions will become invisible to the economy.

[I doubt, though, that regulators will allow large assets, e.g. homes or cars, to be ever purchased through Bitcoin. Payments to employees in the visible economy could also be restricted to "official" currencies - but to date, regualators seem to have not done anything concrete to stop the runaway train that is Bitcoin. Furture regulation could prevent the purchase and sale of property in Bitcoin - or at least requiring full disclosure of exchange value in local currency on the date of transaction. - one way is to use an anti-avoidance clause that allows stamp duty to be charged on a higher value if there is a low consideration paid.] 

This could mean the rapid decline of taxes and the growth of economies (and even legal systems) entirely invisible to the government.

Do I recommend BitCoin now? No, I still recommend great caution, just in case a big regulator somewhere manages to find a way to shut it down. But the risk of any regulatory closure of Bitcoin is fast diminishing. At best, it is likely to be regulated and therefore "regularised" (hence made more popular: once that happens, Bitcoin will shoot up in value to astronomical levels).

Bitcoin is potentially the reverse of a Ponzi game, as it relies on (a) limited issue of coins and (b) complete absence of regulatory disruption. Therefore, once enough people "believe" in it, it only has an upside, not downside.
 

ADDENDUM

BITCOIN: GOING FROM DECEPTIVE TO DISRUPTIVE

Deciphering the cryptic world of bitcoin, July 13, 2014

Continue Reading