Top India Bitcoin operator halts trade after bank warning

Dec 27, 2013 by Penelope Macrae
File picture taken in April 26, 2013 shows pile of Bitcoin slugs sitting in a box in Sandy, Utah ready to be minted

India's biggest Bitcoin trading platform said on its website Friday it had suspended operations after the central bank warned against the risks of using virtual money.

BuySellBitCo.in closed its platform, citing an advisory by the Reserve Bank of India issued on Christmas Eve highlighting the risks of trading in digital currencies.

"We are suspending buy and sell operations until we can outline a clearer framework with which to work," BuySellBitCo.in said on its website, adding the move was "to protect the interest of our customers".

The 's warning comes after Bitcoin, which can be stored either virtually or on a user's hard drive and offers a largely anonymous payment system, had begun gaining popularity in India.

The emergence of Bitcoin and other virtual currencies in India has come despite a traditional preference for assets backed by property and other tangible goods.

"There is no underlying or backing of any asset for virtual currencies and as such their value seems to be a matter of speculation," the bank said in its December 24 advisory.

The "huge volatility in the value of virtual currencies has been noticed", it added.

The central bank stopped shy of issuing a ban on Bitcoin or other virtual currencies.

However, because the currencies were not authorised by any monetary authority there was no established recourse for customers in the case of problems, the bank noted.

The move comes weeks after the People's Bank of China ordered financial institutions not to provide Bitcoin-related services and cautioned against its potential use in money-laundering.

Bitcoin was invented in the wake of the by a mysterious computer guru using the pseudonym Satoshi Nakamotoby.

At the last rate posted by BuySellBitCo.in, which was conducting about 12 million rupees worth of Bitcoin transactions monthly, according to Indian media, one Bitcoin was selling for 48,039 rupees ($776).

The dollar worth of a Bitcoin has rocketed from just cents in 2010 to a $1,200 peak in early December, but has since fallen back.

Various India-based Bitcoin trading exchanges have emerged in the last few months, allowing Indian users to purchase Bitcoin using the local rupee currency.

The Reserve Bank of India noted several media reports of the use virtual currencies, including Bitcoins, for unspecified illegal activities in several jurisdictions.

The absence of information around who is trading in the currency could expose users to "unintentional breaches of anti-money laundering and combating the financing of terrorism laws," the bank added.

An end-of-year report by Kaspersky Security Bulletin said there appears "little doubt they (e-currencies) are also popular with cybercriminals, who are looking at ways to evade the law".

It suggested governments may crack down "on the (virtual currency) exchanges in a bid to put a stop to their illicit usage".

Even though India's central bank issued no formal ban on e-currencies, The Hindu newspaper quoted an unnamed senior banking official as saying most virtual currency exchanges in the country saw the RBI advisory as a precursor of a potential clampdown.

Explore further: EU bank watchdog warns over Bitcoin

add to favorites email to friend print save as pdf

Related Stories

EU bank watchdog warns over Bitcoin

Dec 13, 2013

The European Union's banking watchdog on Friday issued a warning over virtual currency trading amid huge swings in the value of Bitcoin, a lack of regulation and money laundering risks.

Bitcoin trading platform defrauds China investors

Nov 14, 2013

An online Bitcoin trading platform aimed at Chinese investors has suddenly closed, leaving hundreds with more than 20 million yuan ($3.3 million) in combined losses, a newspaper said on Thursday.

Bitcoin rises above $1,000

Nov 27, 2013

The virtual currency bitcoin Wednesday broke above $1,000 per unit, quintupling in a month, according to Mt. Gox, which manages trading in bitcoin.

Recommended for you

Twitter-funded lab to seek social media insights

13 hours ago

A new Twitter-funded research project unveiled Wednesday, with access to every tweet ever sent, will look for patterns and insights from the billions of messages sent on social media.

Facebook makes peace with gays over 'real names'

15 hours ago

Facebook on Wednesday vowed to ease its "real names" policy that prompted drag queen performers to quit the social network and sparked wider protests in the gay community and beyond.

User comments : 13

Adjust slider to filter visible comments by rank

Display comments: newest first

Returners
4 / 5 (4) Dec 27, 2013
There is no underlying or backing of any asset for virtual currencies and as such their value seems to be a matter of speculation," the bank said in its December 24 advisory.


There's nothing underlying or backing most paper currencies either. The value of the paper dollar, for example, is entirely determined by habit and speculation. If it were given an absolute, material value, then brokers would not be able to manipulate stock markets to make huge profits from no material increase in wealth, as they do now. Of course, the very wealthy actually do not want that, in spite of what the "buy gold" people say on television, because if the value of currency were absolute then they wouldn't be able to con other people out of their money quite as easily via the stock market.

People would be better off buying gold than bit coins if they are already selling for nearly as much as an ounce of gold.
kochevnik
2 / 5 (4) Dec 27, 2013
Poor central banks are scared of a currency NSA can't crack into a computer and steal. The West plans to steal from ordinary people to cover their debts to the banksters, rather than toss these criminals in prison
Deadbolt
not rated yet Dec 28, 2013

There's nothing underlying or backing most paper currencies either. The value of the paper dollar, for example, is entirely determined by habit and speculation.


The dollar is effectively backed by the economic stability of the US and its position as the dominating power of the world.

Currencies are backed by the guns and factories of those issuing the currency. Bitcoin has neither.
davidivad
not rated yet Dec 28, 2013
I have had several friends tell me you can make a fortune by bitcoin mining. I laugh at them and say go ahead.
Mike_Massen
not rated yet Dec 28, 2013
Returners doesnt get it, bad thinking
If it were given an absolute, material value, then brokers would not be able to manipulate stock markets to make huge profits from no material increase in wealth, as they do now.
Crap of the highest order !

Returners lumbered on with more rubbish
..if the value of currency were absolute then they wouldn't be able to con other people out of their money quite as easily via the stock market.
Your comment above Returners is the worst piece of propagandist rubbish I have come across in this century, you clearly have no idea how share markets operate.

Please don't be misled by Returners' uneducated ranting who can't seem to understand basic share market mathematics.

Where is the logic of your claim ?
What is the causal sequence of events which give credence to your claim ?

Have experienced life as a public company director & trader in shares & metal futures, you type stupid drivel !

Where is (at least) your high school education in shares?
Returners
1 / 5 (1) Dec 28, 2013
Massen:

Market speculators don't typically make their money from dividends. They make money from things like panic spending, particularly on Gold and Oil for the better part of my life.

If you already have money, you can make enormous amounts of money just from buying and selling Gold and Oil several times per week, without actually producing any resource or service whatsoever.

The only difference between this and counterfeiting is that one is legal and the other is not.
Mike_Massen
not rated yet Dec 28, 2013
Returners *still* doesn't get it, instead blunders more
..don't typically make their money from dividends. They make money from things like panic spending, particularly on Gold and Oil for the better part of my life.
Doh, so what ! Small options to gamble on share speculation but, you *still* havent answered me ?

Returners badly confused with
If you already have money, you can make enormous amounts of money just from buying and selling Gold and Oil several times per week, without actually producing any resource or service whatsoever.
What, by fortune telling markets , recall Bunker Hunt ?

Where do you get your superficial & bad ideas from ?

Returners continues bad thinking
The only difference between this and counterfeiting is that one is legal and the other is not.
What blubbering - re-read my questions in response to your claim re 'absolute', do you need supplements for improved cognition ?

Please, this is a Science site, not a lazy old man's idle muttering site !
Protoplasmix
not rated yet Jan 01, 2014
Please don't be misled by Returners' uneducated ranting who can't seem to understand basic share market mathematics.

Ah, good, an expert on money. I have a few questions:

What do you think of the 'petrodollar' hypothesis, specifically with regard to the 'clamp down' on bitcoin?

Considering all the people whose pursuit of the dream has recently been foreclosed on, and all the bailouts at taxpayer expense, and the fact that the stock market just capped the best year of the century, do you recommend that the poor people, and the zero-benefit-paycheck-to-paycheck people, and the struggling middle class people should buy stocks to solve the problem?

Do you think there's any chance that the popularity of bitcoin will result in Bretton Woods III?
Mike_Massen
not rated yet Jan 01, 2014
Protoplasmix
Ah, good, an expert on money. I have a few questions
Don't claim to be an 'expert' but do know useful economics & primarily energy exchange - which in so many practical ways is identical to money - incidentally the exchange rate is posted all over town on various placards & digital signs.
What do you think of the 'petrodollar' hypothesis, specifically with regard to the 'clamp down' on bitcoin?
Not much, bitcoin is a new paradigm bound to have detractors.

Frankly, if you want to succeed then never place money where it is out of your control, stocks r a risk too.

If you have money ostensibly to 'invest' then the best place to invest it is in yourself, such as education re economics, financing & a skill that you can use to earn an income independent of any other stream controlled by others.

I would also suggest reading a book titled "The Zurich Axioms" written shortly after the 1929 depression which offered insights re hot to survive/manage that etc.

Good Luck
Protoplasmix
not rated yet Jan 01, 2014
Frankly, if you want to succeed then never place money where it is out of your control, stocks r a risk too.

Thanks, Mike. It's likely I have a fundamentally incompatible working definition of success that includes all of us. I appreciate the well wishes. Will check on the "Zurich Axioms."
Mike_Massen
not rated yet Jan 02, 2014
I take the wider view of success in terms of diverse accomplishment, such as;-

- practical qualifications teach skills to build devices or manage health
- general design/repair skills to produce products & enhance intellectual property
- humanities, such as social skills in groups & one on one
- money means little to me except where it eases exploration of the new
thus for about 20 years had lots of fun but little spare cash

I'm not easily comfortable with people who measure success by mere money or material wealth *unless* there are other aspects to their character such as empathy & compassion or the obverse explorations of the human condition beyond the obvious.

Reading is good, I consider diverse philosophies & their exploration a means to understand more of oneself in terms of cognition as much as the philosophies themselves...

Oh and really enjoy picking apart obtuse interpretations of Scientific Method, so much nutty self-delusion some have with their 'knowledge'.

Cheers
kochevnik
not rated yet Jan 02, 2014
Three party currencies, where the third party needs to dominate the planet with ex-Nazi meddlers and spy on the other two parties using the NSA, is about to collapse into obsolescence. The third party has no purpose other than parasitic, criminal aspirations
Mike_Massen
not rated yet Jan 03, 2014
kochevnik offered what appears as opinionated propaganda not connected with anything definitive and/or actionable
Three party currencies, where the third party needs to dominate the planet with ex-Nazi meddlers and spy on the other two parties using the NSA, is about to collapse into obsolescence. The third party has no purpose other than parasitic, criminal aspirations
Where can we go kochevnik with this sort of comment ? something constructive maybe, something actionable, something that progresses the human condition & which can alleviate suffering & address linguistic precision too perhaps ?

I don't see what the point of your strange expulsion is designed to achieve, it comes across as a pattern of idle self-muttering one might blurt to oneself when crossing the street after mistakenly thinking you were about to be sideswiped by someone you already dislike driving a model of car you already have some disdain for and thus being stuck in a form of blithe confirmational bias ?