bitcoin traders in India face the heat

After the RBI warning that bitcoin trading could be in violation of provisions of foreign exchange laws in the country, Enforcement Directorate officials raided offices of rbitco.in and buysellbitco.in. Apparently, buysellbitco.in was the biggest bitcoin trading exchange in India. Trading on bitcoin exchanges in India has been halted post the RBI directive as traders await a clear policy on bitcoins.

Till then, trading on these may well be illegal! What goes against trading in bitcoins is the lack of regulation which makes it an easy avenue for money laundering. Those trading in bitcoins may also find themselves on the wrong side of anti-terror financing laws.

bitcoins: Some facts

1. A bitcoin is an international crytocurrency that came into circulation in January, 2009. A complex programme is used for its creation.

2. A maximum of 21 million bitcoins can be created. As of now 12-12.5 million bitcoins exist.

3. The credit for bitcoin creation goes to a pseudonymous developer Satoshi Nakamoto.

4. World's first bitcoin ATM opened recently in Vancouver, Canada.

5. Several websites accept bitcoins as donation. Information about physical outlets that accept bitcoins is available on coinmap.org

6. In order to buy bitcoins, one needs to register with an international digital wallet to get an alphanumeric string termed as the bitcoin address. coinbase.com is an instance of this. An open source software armory also serves as a bitcoin management platform.

7. The value of bitcoin has gone up significantly in the year 2013, the value being below $10 at the beginning of the year. It has touched $1000 in the recent months and the current 'buy' price is $ 740.52.

8. Tokyo, Japan based Mt.Gox holds the distinction of being the world's largest bitcoin exchange.

9.  This currency has been legalized in Germany.

10. The scepticism emanating from central banks and regulators stems from the risk of its use for money laundering and other illegal activities as the transactions involving bitcoins cannot be traced or tracked. Recently, FBI arrested entrepreneur Ross Ulbricht for his online venture, Silkroad, a web based platform accepting bitcoins, which was selling drugs and arms. It was accessible only through the Tor web network.

bitcoin: A potential fiat currency?

Quantitative Easing has been a much talked about subject throughout the year 2013, with "Will happen/ Won't happen" analysis coming in from all quarters as and when the US jobs data or the inflation numbers suggested that the Fed is indeed achieving its set targets and the situation is ripe for tapering. The central banks around the world are assessing the likely impact of QE tapering on their own currencies but one currency that is making waves around the world and is likely to remain untouched by what Ben Bernanke does now or Janet Yellen does in the future is the bitcoin.


News about the future prospects of the currency has been a bit of a mixed bag with the US online retailer Overstock.com giving it an emphatic nod of approval with an announcement that it would start accepting the currency by as early as the end of 2014 and People's Bank of China (PBoC) forbidding financial and payment institutions from carrying out bitcoin related business. This happened even as the bitcoin was scaling new heights in terms of its value, touching $1200 but the news did act as a dampener and the virtual currency was soon trading at $800 for a bitcoin. General citizens in China are still free to exchange the virtual currency among themselves, not against the local currency though.

Reserve Bank of India has followed suit albeit with a warning in place of a downright ban. The warning pertains to potential risks that dealing with the currency hold in terms of money laundering and cyber security. Players in the bitcoin domain in India now await directives from the RBI in terms of a clear policy in order to carry out the buy sell activities while avoiding being on the wrong side of the law. Entities such as INRBTC.com and buysellbitco.in have thus suspended their operations for now.

Discounting the fact that bitcoin finds itself entangled in the web of regulation, it faces no serious threat to its existence. The general consensus among analysts is that these moves by central banks may delay the use of bitcoin as a full-fledged currency but this currency is here to stay.