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RBI advisory on virtual currency makes Indian Bitcoin exchanges shut shop

Post the Reserve Bank of India’s (RBI) advisory notice, some websites have suspended operations.

Nishtha Kanal|Dec 27, 2013, 15:17:30 IST

Post the Reserve Bank of India’s (RBI) advisory notice warning people about the risks of virtual currencies, the country’s biggest Bitcoin trading platform has shut shop. RBI's notice was intended to bring light to the rise in popularity of virtual currencies around the world and how Indians should approach them. But instead it has had a negative effect on sites which deal with Bitcoins.

BuySellBitCo.in has suspended operations, citing the advisory, reports The Hindu. The website now reads, “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.” The haul has put FBI in the line of fire

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Bitcoin exchanges in India worry about RBI notice

The platform was by far the largest Bitcoin trading platform in India and saw about Rs 12 million worth of Bitcoin transactions every month. The suspension has seen other trading platforms like INBRTC deciding to down shutters and suspending services indefinitely.

The site claimed that it had no option but to “suspend services until further arrangements can be made.” In an online notice, the exchange elaborated. “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.”

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The RBI’s notice warned the public in general of the perils of using virtual currencies and their possible roles it plays in terrorist funding and money laundering. It goes on to say that this led to late-evening trading with Indian Bitcoin owners dumping the virtual currency. The notice mentions other forms of virtual currencies besides Bitcoin, such as litecoins, bbqcoins and even the recently formed dogecoins.

“It is reported that VCs, such as Bitcoins, are being traded on exchange platforms set up in various jurisdictions whose legal status is also unclear. Hence, the traders of VCs on such platforms are exposed to legal as well as financial risks,” the RBI notice reades, “The Reserve Bank has also stated that it is presently examining the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.”

Bitcoin trading platforms and mining startups are reportedly reading into this advisory as a precursor to a possible clampdown, especially since the RBI has allegedly refused to talk to several exchanges and companies regarding regulation.

By Nishtha Kanal

Intrigued by all things social, Nishtha will invariably tweet about you. When not tweeting or writing about the next viral video, you will hear her proclaiming her love to Metallica, James Hetfield, Opeth, Akerfeldt and all bands that go 'growl'. She also obsesses about ACP Pradyuman and South Park and you will always find her moving around with a book. Her focus is on all the happening stuff in the tech domain, and she won't hesitate to take a shot at some of the oddball devices that make their way to our labs.