Will bitcoin take sheen off gold?

Mumbai: Even as the government at the Centre is mulling to table Crypto Bill in the Parliament's winter session, experts say that crypto qualifies as digital gold and a better store of value.

Avinash Shekhar, Co-CEO, ZebPay, says: "We're awaiting further details on the Bill that is going to be presented in the winter session of the Parliament. There have been many positive steps taken by the government to learn and understand crypto and its impact on all stakeholders- investors, exchanges, policymakers. So, we're looking forward to a crypto bill that takes into consideration all the inputs from those discussions."

The government will be introducing Digital Assets Regulations along with a Bill for CBDC. It may be possible that the earnings from cryptos may attract both direct and indirect taxes. Crypto assets may likely be taxed as per the rules of capital gains and it may attract the usual GST, as most services are. Moreover, there may also be talks of charging a one per cent tax on trades.

Manoj Dalmia, CEO, Proassetz exchange, says: "This may not be a negative comment, but a welcoming and insightful thought emphasised by our PM Narendra Modi that genuine and eligible players and exchanges must work together under government regulation and guidelines to ensure that cases of fraud and deception are mitigated and a clear view of policies can guide Investors towards genuine investment opportunities & platforms."

Bitcoin is a limited digital asset, as after the 21 million are mined (predicted to be in 2140), there will never be more bitcoins released. This makes it similar to gold in terms of scarcity. Gold is an asset that will eventually deplete regardless of how many nuggets we capitalise. Easy mining of gold will run out by approximately 2050.

There are at least two assets that are independent from the government: crypto currencies and gold. Experts believe that, while digital assets and gold may be volatile, they both have been proven to retain monetary value.

Prices of both of these assets appreciate or depreciate based on demand and supply.

In the case of fiat money, bank deposits can be depreciated due to inflation controlled by the government. Not only be depreciated, but also be withdrawn or frozen under some invented grounds.

Investors view bitcoin as digital gold and a hedge against inflation, expecting it to appreciate over time, ove-performing the current inflation rate. The same stands for gold, but it has not performed well in the past few years.

What makes Bitcoin not just similar, but a better asset than gold? Dalmia explains it beautifully in items of rarity, durability, divisibility and that the virtual currencies are hard to fake.

Bitcoin is rare. It cannot be created at will; there are only 21 million of them, and no one can create more. That means that no government can control it or fake it. No one is going to create more gold which will be feasible. The scarcity of gold changes depending on how much you put into finding it.

Both bitcoins and gold are almost perfectly durable. As long as the internet operates, bitcoin will be in use. As far back as it can be traced, gold has been used to make jewellery, trade, etc.

Bitcoin can be divided into individual satoshis, with 100,000,000 satoshis making up 1 BTC. Gold cannot be divided as easily or as precisely, but it can be minted in smaller denominations. For starters, satoshis, or SATs, are a fraction of a bitcoin. Simply put, a Satoshi is more or less to a bitcoin what a penny is to a dollar.

Bitcoin and gold can't be counterfeited and duplicated. Bitcoin is easy to recognize and impossible to counterfeit. Gold is pretty recognizable, though it must be tested for purity under some circumstances.

Gold can, Dalmia goes on, give you insurance against inflation and overvalued stock markets. Crypto analysts and experts believe that Bitcoin is the most asymmetric investment opportunity on the face of the planet right now. The upside in investing in Bitcoin is so much higher than the potential downside, that no other investment even comes close.

Yellow Metal Pales in Comparison

♦ Crypto currencies and gold are 2 assets that are independent from govt

♦ Bitcoin and gold can't be counterfeited and duplicated

♦ Capital gains tax on crypto assets likely

♦ It may also attract GST

♦ Further, possible 1% tax on trades

♦ Bitcoin is rare; It can't be created at will; There're only 21 million of them

♦ As long as the internet operates, bitcoin will be in use