The world now has a larger number of virtual currencies than a total 180 recognised currencies in different parts of the globe, notwithstanding issues like bankruptcies and growing regulatory unease about bitcoin and its other digital peers.
Within an ear shot of the 200-member mark, a total of 193 virtual currencies are currently being traded across the internet, although none of them carry an official stamp from the government or banking regulator from any of the countries.
While bitcoin and other such currencies began coming into existence about four years ago, a frenzied proliferation in last two months has more than doubled their count, shows an analysis of data available with various online marketplaces for such currencies.
Apart from bitcoins, ripple, litecoin, auroracoin, peercoin and dogecoin have seen steady pickup in volume as well market value. The latest additions include teacoin, aliencoin, magic internet money and heisenberg.
However, India’s laxmicoin is yet to start as its promoters are keen on understanding the Reserve Bank of India views on this venture. The RBI has issued a public advisory, warning that such currencies are risky and not part of the traditional banking system.
While bitcoin has been seeing a tremendous price volatility, operators and users are looking for newer and other alternatives that they perceive as safer, say traders.
Braving regulatory warnings and new risks like rampant hacking attacks on virtual currency exchanges as well as trading platforms, these 193 virtual currencies have been floated by enthusiasts who claim that virtual units offer benefits like lowest transaction costs and ease of transfer across borders, they added.
The proliferation of new currencies is being linked to the complexities involved in the way bitcoin is ‘mined’ The newer avataars are comparatively much easier to create, word-of-mouth publicity and a rush of speculators has ensured they are catching up much faster, dealers said.
Bitcoin, accounting for over two thirds of total virtual currency volume, has fallen the most to an average price of USD 600 from lofty highs of USD 1,200 apiece in late 2013 after trading below USD 100 for most part of 2013.
According to market estimates, the collective valuation of all virtual currencies put together has dropped below USD 10 billion level, from about USD 13 billion at the beginning of this year.
At end of December 2013, there were total 67 virtual currencies in the market, while their number was in single digits about four years ago as virtual currencies could not strike a chord among users amid a global financial crisis.
The rapid growth of virtual currencies has also shone light on the illegal acts being committed with such systems.
From being used in Ponzi schemes, as ransom for holding files hostage in computers and to facilitating criminal transactions, virtual currencies are the medium of choice for anonymous faces looking for a way to transfer monetary values across the world without being detected, say regulatory officials.
In a rude jolt to growing virtual currency frenzy in India, bitcoins worth crores of rupees held by some Indians have vanished with collapse of Japan-based Mt Gox, which was the world’s largest bitcoin exchange so far.
Having filed for bankruptcy, Mt Gox has admitted to have lost 7.5 lakh bitcoins of its customers and one lakh of its own, which together are estimated to be worth about USD 0.5 billion (over Rs. 3,000 crore).
The exchange was predominantly used by foreigners, including those operating on behalf of clients from India, while some Indians were directly trading there. In its bankruptcy filing, Mt Gox has listed 1.27 lakh creditors, bulk of which are foreigners and just about 1,000 from Japan.
The debacle did intensify calls for stricter regulatory checks on bitcoins and other virtual currencies in India and other countries.
This article has been corrected for an editing error.