Authentication & Security

India arrests Bitcoin growth, RBI and ED put their hammer down

In what could be upsetting news for Bitcoin growth in India, on 26th December 2013 (2 days after issuance of RBI notice), the Enforcement Directorate (ED) undertook the first Bitcoin raid in India.

On 26th December 2013, India largest Bitcoin exchange – Buysellbitco.in – stopped all operations on its platform. And so did other exchanges and portals as well. This came soon after the recent Public Advisory issued by RBI stated that users of Virtual currencies were exposed to legal and financial risks.

The Central Banks notice warned the public of risks involved with the currency such as Money Laundering and anti terrorism activities. The RBI did not however place any restrictions, neither did it issue any sort of ban on Bitcoin related activities. According to the price index Coin Market Cap, a large number of Indian users began selling their Bitcoins in late evening trades due to fear of possible fluctuation in Bitcoin prices globally.

Buysellbitco.in told media agencies that, “Post the RBI circular, we are suspending buy and sell operations. This is being done to protect the interests of our customers and in no way is a reflection of Bitcoin’s true potential or price.” Nearly 12 Million Rupees worth of Bitcoin transactions were being made on their platform every month. This shutdown puts the future of the virtual currency in doldrums.

INRBTC, another Bitcoin trading platform also suspended all selling and buying operations on their website. They said “Only option now was to suspend services until further arrangements could be made. The RBI has stated the users of virtual currencies are exposed to both legal and financial risks. All trades which have been executed till December 26, 2013, will be processed completely. All pending orders will be cancelled and the deposits refunded,” the exchange said, in an online notice as stated by the company in an online post. “Further it (RBI) states that absence of information of counterparties could subject the users to unintentional breaches of Anti-Money laundering and combating the financing of terrorism (AML/CFT) laws,"  they added.

This is what Unocoin.com’s website says. “Temporary buy and sell suspension Posted at 12:11 pm on December 27, 2013 under Service

Post the notice from RBI, Unocoin has decided to temporarily pause its buy and sell operations. All the pending orders today gets fulfilled and no more orders will be accepted till further notice”

In a dialogue with Lets Talk Payments Unocoin stated "Because RBI mentions that buyers and sellers of bitcoin could potentially get involved with money laundering unintentionally, the bitcoin businesses are pausing their operations till they give more clarity about their statement. We are doing the same as well with Unocoin. How ever for CoinMonk it is not fully relevant – so it is unaffected for now."

More about the Raid yesterday: 

The Enforcement Directorate (ED) undertook the first raid in Ahmedabad, India. The raid was performed on the house of Mahim Gupta, CEO of Buysellbitco.in according to Dna. “We have found that through the website 400 persons have recorded 1,000 transactions that amount to a few crores of rupees. We are gathering the data of the transactions, name of the people who have transacted in the virtual currency from Gupta’s server that is hired in the US. At present, we believe that this is a violation of foreign exchange regulations of the country. If we are able to establish money laundering aspect then he can be arrested,” an ED official stated. On initial investigation, The Enforcement Directory found that the company apparently is in a clear violation of FEMA (Foreign Exchange Management Act).

With all this, the future of Bitcoin clearly remains uncertain in India. Elsewhere in the world, Singapore government has decided to stay neutral about it and Overstock.com, one of the largest online discount retailers announced plans to integrate Bitcoin payments in their platform by June 2014. Regulatory uncertainty is a concern with Overstock too. China’s crackdown on Bitcoin caused the currency to deflate from $1,137 in late November to as low as $451 on 18th December 2013. It now stands at around $748 (27th December 2013).

Chiraag Patel

Chiraag Patel is a Senior Reporting Analyst and the Editor of Bitcoin and Virtual Currency channels at Lets Talk Payments. He is an engineer with deep interest in MMORPG, Virtual Banking, Game Currency and Virtual Cash. Chiraag enjoys Reading& Blogging with focus on New Innovation, Technology & Startups in the Payments Space.

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