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New technologies—supported by advances in encryption and network computing—are driving transformational change in the global economy, including in how goods, services and assets are exchanged. An important development in this process has been the emergence of virtual currencies (VCs). VC schemes are private sector systems that, in many cases, facilitate peer-to-peer exchange bypassing traditional central clearinghouses.VCs and their associated technologies (notably distributed ledgers based on blockchains) are rapidly evolving, and the future landscape is difficult to predict. VCs offer many potential benefits, including greater speed and efficiency in making payments and transfers—particularly across borders––and ultimately promoting financial inclusion. The distributed ledger technology underlying some VC schemes—an innovative decentralized means of keeping track of transactions in a large network––offers potential benefits that go far beyond VCs themselves. At the same time, VCs pose considerable risks as potential vehicles for money laundering, terrorist financing, tax evasion and fraud. While risks to the conduct of monetary policy seem less likely to arise at this stage given the very small scale of VCs, risks to financial stability may eventually emerge as the new technologies become more widely used.A lot of people do not know there are so many ways to earn cryptocurrencies by investing legitimately in platforms like www.coastminers.tech where they can get double of their investment in 7 days without losing them(thank me later).The development of effective regulatory responses to VCs is still at an early stage. VCs are difficult to regulate as they cut across the responsibilities of different agencies at the national level, and operate on a global scale. Many are opaque and operate outside of the conventional financial system, making it difficult to monitor their operations. Regulators have begun to address these challenges, with a variety of approaches across countries. Responses have included clarifying the applicability of existing legislation to VCs, issuing warnings to consumers, imposing licensing requirements on certain VC market participants, prohibiting financial institutions from dealing in VCs, completely banning the use of VCs, and prosecuting violators.These approaches represent an initial policy response to the challenges that VCs pose, but further development is needed. In particular, national authorities will need to calibrate regulation in a manner that appropriately addresses the risks without stifling innovation. More could be done at the international level to facilitate the process of developing and refining policies at the national level. International bodies are playing an important role in identifying and discussing the risks posed by VCs and possible regulatory responses, and they should continue to do so. As experience is gained, international standards and best practices could be considered to provide guidance on the most appropriate regulatory responses in different fields, thereby promoting harmonization across jurisdictions. Such standards could also set out frameworks for cross-country cooperation and coordination in areas such as information sharing and the investigation and prosecution of cross-border offenses.VIRTUAL CURRENCIES AND BEYOND 6 INTERNATIONAL MONETARY FUND INTRODUCTION A. Overview 1. New technologies are driving transformational changes in the global economy, including in how goods, services, and assets are exchanged. The development of monies and a variety of payments systems throughout history have helped make exchange more efficient and secure. The rapid spread of Internet-based commerce and mobile technology––supported by advances in encryption and network computing––has driven the development of several innovative technologies. Companies such as Uber and Airbnb have developed radical new business models. Secure online payments systems (for example, PayPal) and mobile payments and transfer solutions (for example, M-Pesa) are changing the ways in which payments for goods and services are made. 2. An important development in this process of transformation has been the emergence of virtual currencies (VCs). VCs, in principle, question the paradigm of state-supported fiat currencies and the dominant role that central banks and conventional financial institutions have played in the operation of the financial system.VCs are issued without the involvement or backing of a state. Some VC schemes make use of “distributed ledger” technologies that provide complete and secure transaction records without using a central registry. These technologies therefore allow for direct peer-to-peer transactions and eliminate the need for central clearinghouses. It is therefore not surprising that private sector interest in these new technologies has been growing, and that attention from regulators and policymakers has not been far behind. 3. VCs and their underlying distributed ledger technologies have the potential to generate benefits. VC schemes and distributed ledger technologies can strengthen financial efficiency by facilitating peer-to-peer exchange while reducing transaction times and costs, especially across borders.In the longer term, these technologies have the potential to deepen financial inclusion by offering secure and lower-cost payments options. Beyond payments systems, distributed ledger technologies have implications for a wide range of markets and financial market infrastructures as a fast, accurate and secure record keeping system, including for stock exchanges, central securities depositories, securities settlement systems or trade repositories. Technological and regulatory progress will be needed to realize these potential benefits. 4. However, these technologies also pose risks. VCs can be misused as vehicles for money laundering, terrorist financing, and tax evasion, and other forms of illicit activity. While risks to the conduct of monetary policy seem less likely to arise, risks to financial stability may eventually emerge as the new technologies come into more wide-spread use.Although the growing use of distributed ledger technologies outside of the context of VCs pose far fewer risks, it may over time pose a serious challenge to parts of the business model of the established financial system. VCs and distributed ledger technologies will thus continue to attract the attention of policymakers and regulators at both the national and international levels. VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 7 5. Any policy response to VCs will need to strike an appropriate balance between forcefully addressing risks and abuses while avoiding overregulation that could stifle innovation. The initial focus should be on the most pressing concerns related to VCs—including financial integrity, consumer/investor protection, and tax evasion—while leaving less immediate risks (for example, financial stability, monetary policy) to a later stage.VCs combine many different properties of electronic payment systems, currencies, and commodities that span the responsibilities of several types of regulators at the national level. VCs operate in a virtual world that reaches across borders, increasing potential risks and creating opportunities for regulatory arbitrage. Effective policy coordination will therefore be required at the national and international levels. 6. This paper discusses the potential benefits and risks posed by VCs and how financial regulators could approach them. The paper begins by explaining what VCs are, and how they work. It then examines key features and related developments in distributed ledger technologies underlying decentralized VCs, along with their potential use for financial development and financial inclusion. The paper subsequently discusses the policy and regulatory implications of VCs generally and concludes with a brief discussion of areas for future analysis.7. As a starting point, it is important to note that the VC landscape is still new and rapidly changing. It is therefore not possible to fully predict the future direction and importance of these evolving technologies or to identify specific longer-term policy responses. The paper is therefore intended as a first step and a platform for further research and analysis. Many of the questions it raises are left for future discussion. B. What are Virtual Currencies? 8. VCs are digital representations of value, issued by private developers and denominated in their own unit of account.2 VCs can be obtained, stored, accessed, and transacted electronically, and can be used for a variety of purposes, as long as the transacting parties agree to use them. The concept of VCs covers a wider array of “currencies,” ranging from simple IOUs of issuers (such as Internet or mobile coupons and airline miles), VCs backed by assets such as gold,3 and “cryptocurrencies” such as Bitcoin.9. As digital representations of value, VCs fall within the broader category of digital currencies (Figure 1). However, they differ from other digital currencies, such as e-money, which is a digital payment mechanism for (and denominated in) fiat currency. VCs, on the other hand, are not denominated in fiat currency and have their own unit of account. 2 Given the fast evolving nature of the industry, a universal definition has yet to emerge and could quickly change as the VC ecosystem continues to transform. 3 This type of VCs is backed by the combination of existing tangible assets or national currencies and the creditworthiness of the issuer. VIRTUAL CURRENCIES AND BEYOND 8 INTERNATIONAL MONETARY FUND Figure 1. Taxonomy of Virtual Currencies10. VC schemes comprise two key elements: (i) the digital representation of value or “currency” that can be transferred between parties; and (ii) the underlying payment and settlement mechanisms, including the distributed ledger system (see the section on distributed ledgers and Box 2).11. VC schemes have different levels of convertibility to real-world goods, services, national currencies, or other VCs. Non-convertible VCs (or closed schemes) operate exclusively within a self-contained virtual environment. Under these systems, the exchange of VCs with fiat currency (or other VCs) or its use in payments for goods and services outside of the virtual domain is significantly restricted. In contrast, convertible VCs (or open schemes) allow for the exchange of the VC with fiat currency (or other VCs) and for payments for goods and services in the real economy.4 The level of contact between convertible VCs and the real economy is much greater than is the case in closed schemes.512. VC schemes can operate through a centralized, decentralized, or hybrid model. The operation of VC schemes includes three components: (i) the issuance and redeemability of the VC; (ii) mechanisms to implement and enforce internal rules on the use and circulation of the currency; and (iii) the payment and settlement process. Each area of operation may be managed by a trusted central (and private) party or in a decentralized manner among participants. Hybrid schemes also 4 An additional distinction is sometimes made between unidirectional flow and bidirectional flow of convertibility, with the former referring to VCs that can be obtained in exchange for fiat currency (or other VCs), but cannot be converted back to fiat currency (or other VCs)—the flow of convertibility being unidirectional (for example, Nintendo Points, some frequent-flyer programs air miles)—and the latter—where the flow of convertibility is bidirectional (for example, Bitcoin, Linden Dollar). See ECB (2012). 5 It should be noted that convertible VCs may be subject to illiquid markets, limiting their de facto convertibility. (continued) VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 9 exist, where some functions are performed by a central authority, while others are distributed among market participants.613. Decentralized VC schemes use techniques from cryptography for their operations— hence the “cryptocurrency” moniker:  In decentralized systems, there is no central party (for example, a central bank) administering the system or issuing VCs. Rather, the central party is replaced by a framework of internal protocols that govern the operation of the system and allow the verification of transactions to be performed by the system participants themselves. As payments and transactions are made through the system, these participants (often referred to as “miners”) are rewarded in newly minted “currency” for performing the payment processing function (referred to as “mining”). This approach serves two purposes: it introduces newly minted VCs into the system and enables the decentralized operation of the VC scheme. In contrast to fiat currency, a cryptocurrency does not represent a liability on anyone.  These systems may allow for the issuance of a limited or unlimited number of currency units. Under most such systems (including Bitcoin), there is currently a limit on the number of currency units that may ultimately be issued. However, new systems are emerging that do not include such limits.  Most cryptocurrencies are “pseudo-anonymous”—while cryptocurrency transactions are publicly recorded, users are known only by their VC “addresses,” which cannot be traced back to users’ real-world identity. As such, cryptocurrency transactions are more transparent than cash but more anonymous than other forms of online payment. Cryptocurrencies challenge the standard concept of fiat currencies. The value of existing fiat currencies is backed by the creditworthiness of the central bank and the government. Centrally issued VCs rely on the backing of the private issuer’s credibility while the value of privately issued currencies (see Box 1 and the next section) have historically been supported by the private issuer’s credibility and commodity reserves. In contrast, the value of cryptocurrencies does not have any backing from any source. They derive value solely from the expectation that others would also value and use them. 14. VCs can be obtained in a variety of ways. Convertible VCs can typically be purchased or exchanged with fiat currency or other VCs, through a VC exchange, through a trade platform,7 or directly with another VC holder. They can also be obtained in payment for goods or services.As noted above, decentralized VCs can be obtained by participating in the transaction validation 6 For example, Ripple. 7 Trade platforms provide a forum where buyers and sellers can offer and bid for VCs (akin to a market place). (continued) VIRTUAL CURRENCIES AND BEYOND 10 INTERNATIONAL MONETARY FUND process (for example, “mining”). VCs are typically stored in a “VC wallet,” either directly through a VC wallet software application or through an intermediary—a VC wallet service provider.8 15. Ancillary service providers have entered the market. Payment facilitators operate as intermediaries between consumers and merchants/retailers, converting VC payments into fiat currency and bearing the exchange rate risk of the transaction. In the case of cryptocurrencies, some service providers offer additional anonymizing services that further obfuscate the traceability of transactions.ARE VIRTUAL CURRENCIES MONEY? 16. Several questions arise when considering the role of VCs as money. 9 Do they satisfy the legal definition of money and fulfill all the economic roles of money (store of value, medium of exchange, and unit of account)? How do they compare to other privately-issued monies that existed historically? If they become more widely used, could (or should) these privately-issued currencies substitute for national currencies? 8 VC wallets are used by VC holders to hold and transact in VCs. Cryptocurrencies are stored in digital wallet software associated with cryptographic keys: (i) “public keys,” which are used to encrypt data and function akin to an account number; and (ii) “private keys”, which are needed for decryption and which function akin to a password to access the cryptocurrencies or a signature to authenticate transactions.Where no intermediary is involved (for example, VC wallet service provider), the loss of a private key will in effect result in the loss of the VCs held in the VC wallet, as the owner of the wallet cannot access its content. VC wallets can be held online (“hot storage”) or offline (“cold storage”). The latter is considered to afford greater protection against hacking and theft. 9 “Money” could have different meanings depending on the context. VCs are comparable to banknotes, coins, and other liabilities of the issuer—the central bank in a modern monetary system. These are also called high-powered money, central bank liability, base money, or outside money. In contrast, money supply includes base money and liabilities (denominated in the national currency) created by banks and bank-like financial institutions (such as deposits and some money market fund shares—called inside money).Even in a system where the central bank has a monopoly right to issue base money, the bulk of the money supply could be provided in a decentralized manner by multiple financial institutions. These financial institutions could be regulated or unregulated (such as shadow banks and as in the “free banking” regime (Gorton, 1985). On the other hand, there is currently no known financial institution that provides inside money in VCs, and the VC monetary system consists only of high-powered money.VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 11 A. Perspectives from Theory and History 17. Theory and history offer some guide-posts for considering these questions (Box 1):  Theory. High inflation in the 1970s after the end of the Bretton Woods System renewed skepticism in some quarters over granting central banks monopoly power to issue nonconvertible fiat currency.10 Friedman and Schwartz (1986) and Fischer (1986) reject Hayek’s proposal to denationalize money (1976). Other researchers, however, continue to contemplate laissez-faire monetary regimes, and there has also been extensive theoretical work on the feasibility and optimality of privately issued money under monopoly or competition.11  History.VCs are not the first example of currencies privately issued in a decentralized manner. While VCs are of course very different from national currencies, monetary systems and the legal concept of money have evolved substantially over time and will continue to change in the future. VCs should thus not be judged solely based on their current characteristics or on how they compare to current monetary regimes. 18. A detailed comparison of the characteristics of VCs with existing and historical currencies sheds further light on these issues (Table 1). For the sake of specificity, Bitcoin is used as a representative example of a VC and compared to a home currency, a foreign currency, and a commodity asset based on current arrangements.Moreover, for a historical perspective, the table also includes key features of a commodity (gold bullion), a commodity currency (gold/silver coins), and a fiat currency convertible into gold and other commodities (the gold standard). The experiences during the U.S. Greenback era are also included, when the government-issued nonconvertible fiat currency “Greenbacks” and private banks were allowed to issue notes as currency. The monetary policy discussion in the policy challenges section assesses whether VCs could provide desirable monetary systems or not. 10 Convertibility in this section refers to convertibility of fiat currencies to commodity reserves and international reserves, in the context of the gold standard or the Bretton Woods System, in contrast with the convertibility of VCs into national currencies as discussed in the earlier section.11 See, for example, King (1983), White (1984), Taub (1985), Selgin (1988), and Selgin and White (1994). VIRTUAL CURRENCIES AND BEYOND 12 INTERNATIONAL MONETARY FUND Box 1. Public and Private Provision of Money: History and Theory Both history and economic theory broadly seem to support a monetary regime with public provision of currency over a competitive private system. The historical track record of containing inflation is mixed across both private and public systems. However, public systems appear to function better when there is a systemic liquidity shortage at the time of a financial crisis and the need arises for a lender-of-last-resort (LOLR). Resilience against inflation There are examples where currency was provided by multiple private banks without high inflation.In fact, many central banks in major advanced economies were first established as private banks, and their currencies did not have legal tender or monopoly status (Box Table). Also, notes issued by (multiple) national banks during the U.S. Greenback era did not have legal tender status but were traded at par with government issued notes (Calomiris, 1988). Box Table. The Origins of Central Bank Powers Country Date founded Monopoly over note issue Notes made legal tender State ownership France 1800 1848 1878 1945 Germany 1875 1875 1909 1948 Japan 1882 1884 1885 NA Italy 1893 1893 1893 NA United Kingdom (England) 1694 1844 1833 1946 United States 1913 1913 1933 NA Canada 1934 1935 1935 1938 Source: Redish (1993).But systems were needed to curb the tendency to print too much money. During the U.S. Greenback era, when convertibility was temporarily suspended to finance the Civil War, note-issuing private banks were subject to various regulations. Their notes were printed by the government and backed 111 percent by government bonds held on deposit at the Treasury (reserve requirement), making them indirect obligations of the government. The aggregate amount of nationally chartered banks’ notes was capped though the limit was later abolished. Moreover, their value was supported by the expectation to resume convertibility when the war was over (Calomiris, 1988). Without these systems, privately-provided nonconvertible fiat money often ended up being supplied in excess. Redish (1993) shows an example of nonconvertible notes with legal tender status issued by a French private bank in the late 18th century. Privately provided notes in late- 19th century Japan led to inflation when their supply ballooned after banks suspended convertibility to gold.The inflation performance of public moneys has been mixed. Before the collapse of the Bretton Woods System, international monetary regimes were largely anchored by gold and/or pegs to the pound Sterling and U.S. dollar standard (Bordo, 1981, and Redish, 1993) that were successful in anchoring inflation. Excess inflation happened even under commodity currency regimes (coins) for seignorage revenue. Medieval European monarchs—who had a monopoly right to mint coins or charge a fee for running a mint—often debased the currency by raising the unit of account value of a coin at the mint and reducing the precious metal content per coin. In a contemporary context, macro policy mismanagement has often led to high inflation and hyperinflation, as observed in many emerging and developing economies. Among major advanced economies, high inflation occurred in the 1970s following the end of the Bretton Woods System.VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 13 These experiences underpinned substantial discussions on tying central banks’ hands again by returning to a rules-based framework including the gold standard (Friedman and Schwartz, 1986). Lender-of-last-resort Theory suggests that the private provision of money is not optimal when an economy may face system-wide liquidity shortages.  The efficiency of competitive market equilibrium has been a key rationale cited by supporters of private provision of money (White, 1984, and Selgin, 1988). However, competitive equilibrium may not be optimal when the market is incomplete, or there is asymmetric information that could cause moral hazard (Mas-Colell, Winston, and Green, 1995). Such imperfections are typical in financial markets. Markets are also incomplete in the sense that not every risk is insurable among individuals, and everyone in the system could be hit by a large, negative, systemic shock.  Many researchers have thus argued that public provision of money could improve economic welfare.Weiss (1980) shows the welfare-improving role of central bank money and active monetary policy as these facilitate inter-temporal smoothing in an overlapping generations framework. Diamond and Dybvig (1983) and Bryant (1980) show the effectiveness of public liquidity and deposit insurance in managing bank runs. Private provision of liquidity becomes insufficient and leads to a crisis without public outside money if a systemic shock hits the system, and contagion risks are imminent (Allen and Gale, 2000, Freixas, Parigi, Rochet, 2000, Holmstrom and Tirole, 1998, Tirole, 2008).1 History also seems to suggest that central banks in major economies often emerged in response to the need for a creditworthy institution to be the LOLR and manage bank runs (Goodhart, 1988, Redish, 1993, Gorton and Huang, 2006).In early history, large private banks acted as LOLR, but the need to handle bank runs more systematically eventually made them central banks or led to the establishment of new central banks. In the U.S., J.P Morgan pledged large sums of his own money and convinced other New York bankers to do the same to shore up the banking system in the 1907 financial crisis. The experience eventually led to the establishment of the Federal Reserve Board in 1913. As of late 18th century, the Bank of England (BOE) was a private bank, serving as the government’s banker. The BOE notes gained legal tender status and monopoly issuance power, as the bank had strong credibility to be able to provide liquidity for other banks in distress. Similar development is also observed with other major central banks (Box Table).The global financial crisis provided a further reminder of the need for a credible LOLR. ___________________ 1/ The welfare implication may become less clear when the moral hazard costs from LOLR are incorporated in the analyses. VIRTUAL CURRENCIES AND BEYOND 14 INTERNATIONAL MONETARY FUND Table 1. Characteristics of Currencies: A Comparison Feature Bitcoin USD (home currency) Euro (foreign currency) Commodity (bullion) Commodity currency (coin) Gold standard U.S. Greenback Era (1861–78) Economic demand factors Intrinsic value None None None Yes Yes None None Claim to issuers? No Yes Yes No No Yes Yes Legal tender No Yes No (in the U.S.) na na Mixed Yes (no) to public note (private) Used as a medium of exchange Small, but rising especially in online retail Yes Limited (in the U.S.) possibly more for cross-border trade Yes Yes Yes Yes Used as unit of account No Yes No (in the U.S.) Yes Yes Yes Yes (all notes shared “dollar” unit) Used as store of value Yes, subject to very high exchange rate risk and sudden confidence shock Yes, subject to inflation risk Yes, subject to foreign exchange risk Yes, subject to commodity price risk/cycle.Yes, subject to dilution of quality (inflation/devaluati on) Yes, subject to devaluation risk Yes, subject to inflation risk Supply structures Monopoly/decentr alized Decentralized Monopoly Monopoly Decentralized Mixed Mixed Decentralized Supply source Private Public Foreign public Private/public mining Mixed Mixed Public and private Supply quantity Inflexible Flexible Flexible Inflexible Inflexible Inflexible Flexible Supply rule Computer program Rule-based (inflation target) Rule-based (inflation target) Opportunity cost for mining Tied to commodity in bullion Tied to commodity by reserve ratio Private note subject to reserve requirement.Supply rule change (by issuers) possible? Yes with agreement of majority miners Yes Yes No Quality of minted coins can be diluted. Reserve ratio can be changed and economized No for private banks. Cost of production High (electricity consumption for computation) Low Low Very high (mining) Medium Low Low VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 15 Table 1. Characteristics of Currencies: A Comparison, cntd. Feature Bitcoin USD (home currency) Euro (foreign currency) Commodity (bullion) Commodity currency (coin) Gold standard US Greenback Era (1861-78) Macro-financial stability risks Risk of hyperinflation due to over-supply? No for individual VCs Possible (with policy mismanagement) ... Limited Possible (by diluting coin quality) Possible (by ending convertibility) Possible (if losing credibility to resume convertibility) Risk of long-term hyperdeflation High Low … High High High Low Base money quantity changes to temporary shocks? No (limited even with rule changes) Yes No (to US money demand shocks) No No Somewhat (by changing reserve ratio subject to total holding of gold) Yes Can the issuer be lender of last resort with outside money?

There is 1 possible condition under which the proposed tax cuts would trickle down. That situation would be if there was insufficient capital for investment and our businesses were having trouble accessing credit or investment funds. In this case, the tax cut aiding wealth’s consolidation would make more wealth available to invest.However, US corporations are already sitting on over 1.9 Trillion USD in cash. They have no shortage of money for investment. In fact, the primary reason that this 1.9 Trillion has not been invested is because investing it in new jobs would be a fireable offense that would get any CEO sued by his shareholders and would cost him his job and reputation.CEOs generally work for their shareholders, and they have a fiduciary responsibility to serve their shareholders optimized profits. If these CEOs expanded investment when it was not necessary to expand, or when there was no new consumer demand to capture, it would be trivial to make a case for dereliction of duty, waste, fraud, and abuse. They literally can not create new jobs, higher wages, or healthier retirement plans, by definition, without being sued.You see, the consolidation of wealth itself causes economic issues and worsens the quality of life for the American people, as evidenced by the series of following charts. The first shows us that median income today provides less disposable income than minimum wage did in 1980. So the middle of America today is doing worse than the bottom of America 37 years ago:In this graph (source: ‘X’ Marks the Spot Where Inequality Took Root: Dig Here ) we see that a gap developed in the early 1980s between productivity and wages, where businesses kept more of the margin of people’s labor:And finally in this chart we can view that the wealth contained between the yellow and red lines went completely and totally to the top 1%:This is because, on an individual level, as we get richer we tend to save/invest more and spend (a lower percentage) of our money. On a wide population level, this means that as wealth consolidates, the ratio of cash available for investment to the amount of consumer demand that investment needs to fill changes dramatically. Very quickly, competition for consumer demand drives down return on investment in creating new things, and drives up return on investment from speculation on economic rent privileges, such as Landlording, Resource extraction rights, owning monopolies or monopolistic industries, merging and consolidating industries, taking advantage of currency issues caused by foreign use of USD as a reserve and currency market manipulation, etc.Because of this, we’ve watched the FIRE (Finance, Insurance, Real Estate) market take up a larger and larger segment of our economy over time, and we’ve watched as wages people earn account for less of the nation’s income and unearned special privileges of the nobility class account for more of the nation’s income.This tells us that right now, in order to improve the economy, we need trickle up economics rather than trickle down. We could spend money on our infrastructure, on research, on education, on all sorts of things that would make our economy more sustainable, more comfortable, more efficient, more futuristic, happier and healthier for all. The rich will get the money eventually anyways, they always do. But imagine the good that happens if that money at least passses through the hands of the poor and hard working American people first?(see other answers for extensive documentation of every single time Trickle down has been tried and has failed miserably, they do an admirable job about citing all examples, I’m just trying to provide a new way of understanding *why* and *how* it fails to work and what would work instead).Thanks for reading!

Read this article - start-up registering business in india ?The information on starting or registering a business in india, is not one of those things that are very well available. The government staff who do it, don't want any layman to be informed, because their bread and butter is in the bribe money they get on each and each thing they do to accept your registration to helping you understand what and how to do it.But things are better with egovernance now.. read on. I think the company registration stuff is one of the first things to be a successful egovernanance project for India.About this post:I am setting up this blog post, and will be updating it regularly as I find more information on this and other interesting areas of starting businesses in India.. also I plan to write posts on my experience over years in helping people operate or handle their businesses... in the context of Indian companies only.If you have something to share/add/suggest, you can email me at harish.palaniappan @ Email from Google and I will find time to discuss with you and add your information and experiences in this blog as well.Information On Companies, Acts, and processes in IndiaMay be these links help to kick-off your information collection drive:Starting your own business in IndiaForming a company in IndiaStarting a business - by doingbusiness.orgThe Indian Ministry of company affairs websiteStarting a business in singaporeMCA21 : Online company registrations and other e-form processesThe Indian ministry of company affairs has setup an online governance website since september 2006 (delayed by almost 6 months) with the help of Tata consultancy services.* Note: Before you read further, understand that this post is not updated regularly when the ministry of companies of india's policies or processes change.. so you should look at this as a starter only.. and do find for yourself more information at the Registrar Of Companies offices around India.. or in the mca21 website.Types of companies:In the different types of companies that can be registered (or that can be created in India at all legally), there's no possibility of starting a single person company.. At a minimum, you can only start a private firm with 2 directors.But, the government has been recommended by an expert committee, to add a new class of companies which is proposed as 'One person company' and probably may have OPC Pvt. or OPC Pvt. Ltd. as the ending name of the company.If this recommendation is approved (which probably will be by amendments in the companies Act), then there will be a possibility of registering One Person companies in India. As of now, you atleast make a friendly legal entity as a director apart from yourself, like your mother or wife, or some friend, and register your company as a Private company with minimum 2 directors.Though it is technically bad that India hasn't still recognized 'one person companies', practically it is better to register as a private company since that will avoid further paper work when your 'one person company' grows to have employees which then requires a conversion in your registration or possibly re-registration.-- continuted --If you are a small enterpreneur, as it happens always, and probably into Software solutions, planning to be a product-based company, or services-based company, thinking of selling your software products / services within India or abroad, then registering your company as a Private firm with 2 directors would do. But this would allow you only to do business within the country. For legally allowing yourself to attract foreign currency through sales or service costs, all you need is an Import/Export number/code (costs somewhere less than 2000 rupees i heard...this number you will quote later while filing your filing your returns.. for foreign currency revenues)...but registering as a private company seems to be the first job to do.To register a private company:1. You can do everything onlineDoing the process online means, you download forms, fill them up digitally using adobe acrobat reader software, attach your digital signature and submit it in submission page on Ministry of Corporate Affairs The website says it will give you service request number for every such submission and you can track status of application online with that number. Also, if a form is rejected and if it is put in 'resubmit with proper information' or something like that, then without additional cost you can refill and resubmit under the same request number.1. Get DSC (digital signature):For all this you need a digital signature. Since there is no paper involved you can only sign digitally.. and only legal and secure method is through digital signatures which are given unique to every person who buys one.Note that the digital signature has nothing to do with your manual signature, it is some very very long and undetectable code provided to you as a file through email or in a thumb drive like storage media.And yes, keep the file or DSC media safe once you buy, because anybody can just steal this file and attach your digital signature to all documents that accept digital signatures (which is only company incorporation or name change or efiling forms today.. but later many other processes in life, for example filing company returns, also might start being computerized and accepting digital signatures)You buy DSC from Digital Ceritifying Authorities in India like MTNL (delhi and mumbai), TCS(all over india), and otherslisted here.While visiting the above websites you will see that there are different classes of digital signatures, and might be confused on which one to buy. The one that is minimum required for our discussion is 'Class 2 individual' or higher classes but something that is for an 'individual'. It is worthy to note here that, 'Class 1 certificate for individuals' which is a basic type of dignital certificate, is for 'individuals' but this DSC is not given based on proof of identity or proof of address.. so the government may not accept 'Class 1 certificates'.Recommedation: Buy a 'Class 2 individual' certificate.2. Get DIN (Directory Identification number):This is probably the only low cost process in incorporation. It costs 100 rupees to get yourself registered as a director (or going-to-be-director) of some company within india.Seems like anybody can apply for a DIN, provided you have any of these.. driving license/passport/elector ID, which is a valid proof of identity, and proof of address.The step-by-step process of getting a DIN is given hereRemember to get a DIN for your mom / wife / partner also if you plan to ask them be the second director of your small company.MCA User RegistrationTo submit forms, on the MCA website, you need an identity on the website.For now, since you may not have a DIN and DSC, you can register as an individual, using the 'New user registration' link on Ministry of Corporate Affairs . Then you can login with your password just like in yahoo mail or hotmail.After you get a DIN and DSC, re-register as a Business professional, using the same link.. and then on you will use your DSC to login to the website.3. Form 1A - Company name availability and blocking.This application is for blocking the name of the company you want to register.All forms that we are talking about in this or other steps are available hereBefore you download and fillup form 1A, you should check whether your company name is available through this pageFill up form 1A, with 2 DINs, affix your DSC, if you have to attach any documents scan them and attach them as files in the end of the form as applicable. Then submit the form. Note your request number and track the form until it is approved. We are almost half done.The above 3 items are the main items and all or most processes below can be done simultaneously.4. Role CheckThis is a simple process where a DIN and DSC are matched and verified to be of the same person, and also that this person is a valid signatory of the company.I am not sure, but this process might be neccessary only for efiling of tax or returns.. not for incorporation..Details about this step is here. http://mca.gov.in/MinistryWebsite/dca/rolecheck/rolecheck.html5. Form 1 - Incorporation Application:Download Form 1, fillup, attach digital sign and submit.6. Form 18 - Office address formDownload Form 18, fillup, attach digital sign and submit.7. Form 32 - DIN appointmentDownload Form 32, fillup, attach digital sign and submit.Steps 5, 6, 7 constitute the main parts... and if the Forms 1, 18 and 32 are approved, you will get a CIN or company identification number which you should quote alongwith your Company's PAN number (apply for one, if you don't have), in all future forms like tax forms, name change or address change forms.The overall cost of registering a private company with 2 DIN's through online mode, could cost as less as 2500 Rupees.. but this estimate can increase based on your capital investment which you will mention in Form 1A and others.As mentioned earlier,All forms are available hereAll process applications should take only a few days to be processed.All above processes might not have their old manual form filing methods sooner and everything will become digital because the ministry of company affairs is overwhelmed by its data, and is strongly being computerized. Already tax forms I think, are no more accepted in paper and government has recruited filing officers who help those who are not able to use a computer and do the process digitally.All above processes are part of a system called MCA21 and is managed and authorized for use by the ministry of company affairs and all its registrar of companies (RoC) offices.Initially, me and my friend hired a consultant for doing my friend's company's Registration(/Incorporation).Though this consulting company does it through Ministry of Corporate Affairs website only, they put in their experience of dealing with government processes.But, yes, you don't need to hire a consultant if you have the time to do it online, and if you know people who can attest your proof of identities (a gazetted officer), and if you know some lawyer who has authority to notarize with his signature anything that you produce on a stamp paper.Our consultant, was an authorized 'Company secretary'. It seems Ministry of Company affairs (MCA) has training and certifications for 'company secretary', which people take up and get authorized/certified (by the govt.) to provide these services to people. Company secretaries are obviously people authorized to do more than just incorporation.. like handling disputes between directors of companies, handling buyouts of companies, and many other things like that.. which require people with legal and indian acts and policy knowledge to do it.For us, our consultant would take care of verifying all documents, getting them attested, getting any legal papers notarized, and submit them through Ministry of Corporate AffairsCertain processes are easy.. and you can go to a consultant after these processes and save a few thousands in fee.For example, if you are a techie, and understand browsing and related technologies, then you are actually better than the consultant for getting your digital signature... and this one thing itself could save you more than 500 rupees. because I understand consultants cost 700 - 1500 rupees for filing your DSC application itself.Digital Signature:Just apply for a digital signature as mentioned above.. in TCS or MTNL websites.They will ask you to send some documents to a verification authority.The verification company will just verify your id proof and address proof and send you a digital signature kit with an eToken.An eToken is a protected pen drive/flash drive/usb drive, in which you can't do any data transfer but it will have your digital signature in it and when you insert it into any PC usb key, it installs the signature on the machine...not everything.. just the general part of it. you have to keep the key on the machine until you sign documents and remove it after.This kit and the digital signature costs 1,200 rupees for two years of validity.. (cost from TCS)If you apply from your machine, yourself, you will pay 1200 to the verification authority. nothing else. But if you use a consultant, he will do the online part also for you (assuming you are not the tech friendly person) and charge you twice or even more than the actual cost.Form 1A, and DIN application:These two forms are the initial steps, and probably easy steps for incorporation.Form 1A:Ministry Approval of Form 1A that you submit, means your company name and location is approved and you can start incorporation process. The name is valid only for 6 months and you should incorporate within 6 months.. or you can renew the name for another 6 months. The cost is a flat price of 500 rupees payable on http://Ministry of Corporate Affairs through credit card.If you are starting a software company, Form 1A will have no problems.. since the ministry won't question your address of manufacturing. Other businesses might have problems if the ministry feels your address is a residential area and you business is not proper to be there.. or things like that.In Form 1A, you have to give 6 or 7 company name choices.You type names... likeSample solutions Pvt., Ltd.,Sample software solutions Pvt., Ltd.,Sample Pvt., Ltd.,One of it gets approved.Director Identification Number (DIN):In India, to incorporate a company you need minimum two directors.. (yes, the law is outdated, and only recently government is considering recommedations that single person companies should be allowed to register)If you don't have another director, pull some friend you like.. or easier, get your mother or father as another director. So, atleast two directors should apply for and get a DIN to register the company under them. Later you can always change your directors, company name, address, anything.. just by submitting that form or application alone...and ofcourse paying for that change alone.If you are two or more people who will be directors, and if all of you have a valid passport, no other proof is required for submitting to government anywhere in the full process. A valid passport stands proof for name, address, and father's name most of the time... and the company affairs ministry seems to approve all applications with passport as proof for people, very smoothly.You don't need a consultant for submitting DIN if you follow the instructions clearly on the DIN pages that the ministry has.I think on Digital signature, and DIN .. ministry's website is clear.. and process itself is clear and easy to do by anybody who has used software like browsers, adobe acrobat, etc.,After two DIN's get approved, you can use the DINs and DSC of one director to apply for the actual, main, important form .. FORM 1. .. so this is why the first form we submitted was called FORM 1A (I was wondering why isn't called form 1 if its the first step in incorporation)For Form 1, we need the following.1. Form 1A approval (approving the name of the company)2. DIN numbers of directors (minimum two directors for pvt. ltd. company)3. Articles of Association (a stamped paper agreement signed by directors stating their claims of part ownership of company, has all about holding of shares, how they could be sold, how they could be bought back, blah blah..)4. Memorandum of Association (again a stamped paper document signed by directors stating what all are the objectives of the business, what all they want to sell/buy/resell/import etc., through the operations in the business, what all rights they will exercise in doing the business like renting space/real estate, having employees, etc., blah blah.. important part will be statement of objectives of business.. its like asking for incorporation only to do business on these lines.. if the operations or objectives change, you have to change the memorandum and resubmit for approval until which you can't do the new business)5. Form 18 stating the address of registered office of the company. (a simple form)6. Form 32 stating the DIN numbers of directors of the company. (a simple form)Sample word document templates for 3. and 4. can be downloaded from here (3) and here (4).Before you download, check up whether the ministry website has latest template of these files downloadable there.. as of this writing the ministry website hasn't put a link since this is a legal document and obviously it is a very important step which needs complete understanding by the person before signing it. The links above are provided only for you to have access to samples so you can read in detail before you get into doing it. Also, if you get to read, the 'Memorandum document (4)' read the 'objects' part carefully, because it says what you want to do with your business and you know this better than your consultant.Submitting Form 1 means, submitting all the above.In submitting Form1, you will need a consultant or help with the text from a Chartered Accountant, or company secretaries, or simply referrence documents from friends who have already done this.That's if.. you submit Form 1 digitally scanned and signed with the digital signature of one of the directors, through Ministry of Corporate Affairs... originals also have to be submitted to the registrar of companies.While submitting Form 1, you have to pay a registration fee which is based on a slab for the capital you are mentioning.. minimum capital is 1,00,000 rupees.. I mentioned just that, and the fee was 4,800 rupees for that.. (so that means it takes a minimum of 4800 rupees for registering a private limited company in India, not like I thought earlier that it could be done with around 2500 rupees).Government generally approves Form 1 submission in 1 day after the originals are submitted.Sometimes if the objectives of business stated in the memorandum is not clear / the AOA (3) or MOA (4) documents have mistakes / incomplete, then the registrar office raises a query or asks for deletion of objectionable points, or asks clarifications.. and the form has to be resubmitted if changes are made.. and I believe you don't have to pay again for corrections but I am not sure. For this part, probably being proactive, my consultant took a power of attorney from me and my mom for doing such changes himself, if they are raised, and to resubmit the memorandum himself without signatures from the directors (me or my mom).Once, your Form 1 is approved, within a day or two you will receive an email with a one page pdf certificate of incorporation(unsigned) with a Company Identification Number (CIN).. probably they will send an original signed one later which I am yet to receive.Actually, you should start business transactions, only after you receive this certificate.. though it happens usually that everybody does registration or incorporation a couple of years after starting business.Import / Export Code - IEC:After Registering the company, a software solutions provider, who wants to be able to provide services to foreign clients, or sell products online to people outside India, MUST apply for an Import/Export license.Bank account:For getting IEC, you need to have a current account in a bank under your new registered company's name. The bank will obviously ask your documents of company registration. Other than that, the bank will ask you a 'Board Resolution' from your company, signed by all registered directors of the company, authorizing one or more of the directors of the company to open and operate the account in the company's name. The board resolution is just a letter/statement from the people who represent the company, but some banks like it in a specific format and you can ask the bank to give you the board resolution format if they have. Some banks even have this format downloadable on their websites 'corporate banking' sections.The current account, will also be useful for you to do transactions in your company's name, which is a MUST for accounting your company's cash flows. Also, you will be able to accept payment from your clients in the name of your company through Cheques, direct wire transfer, etc., which clients will like since they will understand that your company is a permanent entity, and you are not somebody who takes money and can go missing.IEC application process is simple:You get an application form from the Zonal director general of Foreign Trade.. or download from their website (like their Tamilnadu/Chennai office website).Major attachments to this process are:1. your company registration form,2. a letter from your bank attesting that a current account is held under your company's name operated by one of the director's of the company, and the bank should attest in the letter the photographs of the directors of the company.The zonal director's office will guide and help you in the application process by rejecting the application with corrections mentioned clearly for you to correct and re-submit, each time you do it.Some consultants take close to 3000 rupees to do the IEC process.. my recommendation Do it yourself if you have not done this before, you will like to know and be clear of what is happening.