Abstract: The global financial system has always been on the look-out for better, faster and secure payment systems. From barter to metallic standards to fiduciary paper currency to electronic payments and now a variation of virtual payments system in the form of Bitcoins has always found takers and promoters. The latest-call it an invention or an innovation has been in news both for its strengths and weaknesses. Its relevance and applicability in the Indian context needs close scrutiny. The current study is one such attempt. Bitcoin is a payment system invented by Satoshi Nakamoto Satoshi in 2008 and introduced as open-source software in 2009. The system is peer-to-peer all nodes verify transactions in a public distributed ledger called the block chain. The ledger uses its own unit of account also called Bitcoin. The system works without a central repository or single administrator which has led the US Treasury to categorize it as a decentralized virtual currency. While Bitcoin is not the first virtual currency, it is often called the first crypto currency. This is technically untrue and while Bitcoin is a crypto currency, it’s not the first. Instead it’s more correctly known as the first decentralized virtual currency. It is the largest of its kind in terms and in its theory of leisure class Veblen. How relevant is it as a payment system in a substantially unorganised financial system like India? How the business of Bitcoin can be promoted as a viable, profitable and long term system such as the Western Union and the like? What issues need to be closely looked into before it can get full public acceptance, etc., are some of the questions this study tries to examine. Specifically, the study aims at analysing the concept and evolution of the payment systems in the world; Bitcoin as a concept and a payment system; the main features and contours of payment mechanism associated with this; Bitcoin as a payment system in India and the business and legal challenges that this new system poses. It is hoped that this study will be a welcome addition to the growing literature on the subject.