Reserve Bank Warning Shuts Down Indian BTC Exchanges
Another official warning has Bitcoin exchanges scrambling. This time it is India’s turn. The Reserve Bank of India issued a statement a few days back warning all parties involved in Bitcoin and virtual currencies that there may be a range of implications, from financial to legal, for Indian citizens. As a result, several Bitcoin exchanges have shut down operations.
Bitcoiners in India
India has been relatively slow to get onto the Bitcoin wagon when compared to its Asian counterparts like China. With over 1.2 billion people living in India and the country making its mark in the information technology industry, one would expect Bitcoin and other digital currencies to be much more popular.
But it has been hampered by regulatory concerns and government warnings that highlights its volatility and potential to be used as a medium for illegal activities.
Now the concern is that the government may clamp down on Bitcoiners and the consequences could be severe. The regulatory issues are not significantly different from the obstacles posed by other nations. However, Indian Bitcoiners have to be even more concerned than others about the money-laundering and terrorism issues than citizens in other countries.
Money Laundering and Terrorism
India has a massive problem with black money. This is money that has not been officially taxed by the government. Some of it has been earned legally but not always. It is estimated that the black money economy in India may be as high as 26% with official estimates stating that as much as $500 billion are in foreign tax havens.
Furthermore there is the concern about organized crime syndicates, a massive problem in India, using Bitcoin exchanges to ‘clean’ money. And the threat from terrorists have been another issue which is major in India seeing that the country is taking a hard stand against terrorism that has been plaguing it for decades.
All in all this makes life difficult for Bitcoin exchanges. With the Reserve Bank of India waving a stiff finger at Bitcoiners, exchanges could be unknowingly aiding tax dodgers, the mob and terrorists. If implicated and successfully convicted, owners of exchanges could find themselves in hot water, possibly even facing jail time.
Moving Ahead With Bitcoin In India
The problem for Bitcoin exchanges and other parties involved is that the refusal of the Indian government to officially define digital currency means that there is no way of developing a proper regulatory framework. Indian authorities do not even want to treat Bitcoin as a foreign exchange like the Swiss. This leaves all parties involved in limbo as to how to move ahead.
While the Indian government has not banned Bitcoin and other digital currencies, it has left newcomers to the Bitcoin scene a bit weary. Apart from the warnings of Bitcoin volatily, the Indian government has highlighted to its citizens that digital currency trading may be a Ponzi scheme. The move by Bitcoin exchanges to close shop even temporarily will not garner much confidence in Bitcoin among Indian citizens.
The recent developments in India may not be a concern for the global Bitcoin community. India does not have to the power to significantly influence the price fluctuations of Bitcoin due to its smaller number of users when compared to countries like China. Nevertheless it is not a positive development that exchanges are suspending services. What the future holds for Indian Bitcoiners and local exchanges remains to be seen. But for now it is not looking extremely positive.