Bad news for the Indian bitcoin industry. Bitcoin operators across India have begun shutting operations after the RBI cautioned users against virtual currencies and bitcoins on December 24. Meanwhile, the Enforcement Directorate (ED) conducted raids against bitcoin operators.

Indian Bitcoin operator buysellbitco.in had posted, “Post the RBI circular, we are suspending buy and sell operations until we can outline a clearer framework with which to work. This is being done to protect the interest of our customers and in no way is a reflection of Bitcoin’s true potential or price.” reports Firstpost. The report filed by Firstpost says that many bitcoin operators in the country have shut down their websites for an indefinite or temporary period of time while others have pulled down their servers.

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In a parallel development, raids have also begun against bitcoin operators. According to DNA, the ED has conducted raids against bitcoin vendor Mahim Gupta from Ahmedabad, who provides trading through buysellbitco.in. The ED have alleged that the site was in violation of Foreign Exchange Management Act rules.

“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,” said an ED official to DNA. ED officials estimate the value of transactions to be around INR 20-30 cr. Raids were also conducted in the Satellite area of Ahmedabad.

Other operators who have shut following the warning include operator INRBTC, who also referred to the RBI warning. The site has stated that the only option it had left now was to “suspend services until further arrangements were made.” The company intends to process all trades executed until December 26 while the pending orders would be cancelled and refunded.

In its warning, the RBI had said that there could be potential financial, operational, legal, customer protection and security related risks that virtual currencies pose. According to Firstpost, a Government official has said that a possible plan of action to regulate bitcoins could be by going the American way. In the US, bitcoins are subject to money laundering regulations as is applicable to regular financial transactions.

 Earlier this month, International Bitcoin Exchange Buttercoin said that it was talking to financial Institutions in India to set up white labeled Bitcoin exchanges for them. India even had a global bitcoin conference was organised in Bangalore this month.

 

Recommended Read:  Bitcoin 101: Five Things You Must Know About Bitcoins

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