6 ms·

First time in the country, ED raids a Bitcoin seller in Ahmedabad

67 points by chaitanya 13y ago

swatkat 13y ago
That DNA article has half-baked information. Here are some saner links: http://www.thehindu.com/business/Industry/bitcoin-exchanges-shut-shop-in-india/article5504407.ece http://www.thehindu.com/business/Industry/bitcoin-exchanges-... http://www.zdnet.com/in/bitcoin-exchanges-suspend-operations-in-india-amid-govt-warning-7000024648/ http://www.zdnet.com/in/bitcoin-exchanges-suspend-operations... >>>The central bank had, on Tuesday, issued a notice, warning the public of the risks involved with virtual currencies while claiming that it could be used for money laundering and funding anti-terrorism activities. It stopped short, however, of issuing a ban or any other restrictions. But still, I don't know what "framework" RBI wants to bring in, to "regulate" Bitcoins. From http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247 http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=3... >>>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.
- rikacomet 13y ago
  The framework for bitcoin, is under consideration. until a proper system is thought out, and formed. Bitcoin would retain its current status.
- chaitanya 13y ago
  Thanks for the links!
ashray 13y ago
Oh man, here we go again. The amount of FUD in this article is absolutely shocking! The Reserve Bank of India has not declared bitcoin as illegal [1]. The article certainly does insinuate that it is: A couple of days after the Reserve Bank of India issued an advisory to public not to indulge in buying-selling of Bitcoins, the first raid in India was undertaken in Ahmedabad by Enforcement Directorate (ED) on an entity that provide platform to trade in this illegal but virtual currency. I'm 100% certain that the website in question however was in violation of several KYC and AML norms as well as money exchange regulations, so the fact that they shut it down does make sense. It is sad more-so because the regulatory framework is extremely opaque and if I were to start a bitcoin business in India, I wouldn't know where to begin... The RBI has done a shitty job so far of regulating the Indian Rupee. I'm an Indian and my personal savings are now worth 30% less since 2009 on a global level (USD->INR went from Rs. 43 to a dollar to Rs. 62 now..). Internal inflation is at 10% YOY and there's no practical way to protect your money. Of course, I'm not implying that bitcoin is the solution to all these issues, just saying that on a personal level I do have issues with the way the RBI has managed (mismanaged?) our currency. [1] - http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247 http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?pr...
- vellasib 13y ago
  Correct, Calling Bitcoin as illegal is absolutely rubbish. They want to give Bitcoin the same treatment which they gave to PayPal that is, make it unusable.
- kamaal 13y ago
  RBI has mismanaged our currency? Sorry the global crude oil prices are soaring, thanks to sanctions on India's major oil supplier(Iran). Major world economies are in a state of war since the whole past decade. None of these are under RBI or Government of India's control. Yes there is corruption, but we are equal partners to that. In case you haven't noticed bulk of India's import business depends on software. There is massive anti-outsourcing wave, and at the same Indian start up industry hasn't really compensated for that. There is every reason why the government can be skeptical Bitcoin in India. We have massive tax evasion situation prevalent here. This is not a anti-technology anti-capitalism stance the government is having here. The public cheats on taxes so often, the government has 0 reasons why it should trust some thing new like Bitcoin.
  - ashray 13y ago
    You are right that the entire blame for INR depreciation does not squarely sit on the shoulders of the RBI. It is a problem with reasons that go far beyond the control of the RBI. Yes, there is a huge current account deficit (export/import imbalance) and that is a big part of it. However, as the agency that manages the circulation and control of the currency, ultimately I look at the RBI as the 'face' of the Indian Rupee. That said, the government doesn't have to trust bitcoin. However, regulatory burden in India is extremely high regardless of the kind of business you want to start. India ranks poorly on several 'Ease of doing Business' indexes. [1] I'm bringing this up since you mentioned the start up industry. It's just not that easy to start something in India. Yes, tax evasion is a huge problem in India. But that's a cultural thing. The government has made it very hard to evade taxes (as long as you rely on existing banking channels) for now, but it doesn't really stop anyone. I can imagine that they are afraid that people will launder money by exchanging cash directly into bitcoin. However, why doesn't the government then go after the real estate business in India that normally takes 30%+ of the money in cash ? It is extremely hard to buy properties in resale unless you agree to pay a large percentage in cash. Oh wait, the government likes to put their black money into real estate. For the same reason as Real Estate, I highly doubt that the Indian government will ban bitcoin or make it illegal. They have plenty of money they would like to sink into this new genius asset class. They might however make it harder for regular people to get into it. Besides, you can always wire money to bitstamp and buy bitcoins as much as foreign exchange controls would let you. [1] - http://www.doingbusiness.org/rankings http://www.doingbusiness.org/rankings
vellasib 13y ago
I feel sorry for this guy. I've bought bitcoins from him in the past and I think he was doing a good job, at least for ensuring that his services are not used for money laundering. ID and address verification documents were needed and a copy of the PAN Card was also taken. Since all payments are made via bank accounts, It won't be difficult for ED to list out the bitcoin traders even if they were not collecting this information. I wonder how the website's users would be impacted.
- rikacomet 13y ago
  he is not arrested, he is under investigation. As you said, he documented all things, than, if there are no descrepencies, he would be allowed to function normally.
  - spada 13y ago
    Do you honestly believe that's how things work in India?
anujkk 13y ago
What about those in India who traded using localbitcoins.com? Is there any possibility that they too can get into legal trouble or affected in some other way?
- vellasib 13y ago
  I don't see anyone getting into trouble, as long as the money which you used to purchase bitcoins from them was not already stained. Of course, people who bought using these sites might have the ED Scanner go over them, but again, nothing to worry unless you have undeclared assets or anything otherwise illegal. Indians can still do a wire transfer to MTGox and purchase bitcoins.
  - jerguismi 13y ago
    I would not recommend mtgox, which is known about its delays with withdrawals, and has higher prices than other exchanges. Check out bitstamp, btc-e etc.
    - zachlatta 13y ago
      Mt. Gox's prices and delays tend to be specific to the US. I haven't heard of Mt. Gox troubles elsewhere.
wsxcde 13y ago
I see random people confidently asserting that btc isn't illegal in India. Don't listen to them. Talk to a tax lawyer. If you're in India, the sensible thing to do is to stay away from bitcoin. This is based on my conversations with my brother who is a tax lawyer. According to him the legality of btc and the laws that govern its purchase/sale in India aren't clear at all and there is an expectation that the RBI will clarify the regulatory framework and the laws that they believe apply to btc. He also believes that RBI has historically favoured extremely conservative interpretations so they will likely shoot down btc. This is obviously not legal advice, not least because it's coming through a lossy channel (me).
- ashray 13y ago
  This is interesting. So your brother thinks that in the near future the RBI will say that Buying bitcoin is a crime. Bitcoins will be the same as cocaine or .. well in India sex toys also share similar status. I personally find it quite unlikely that a democratic country will prohibit it's citizens from transacting in something like bitcoin. But hey, crazier things have been known to happen. However, I'd like to ask. Why preemptively assume that bitcoin will be declared illegal ? I can understand that the RBI is conservative and they forced Paypal to create automatic bank account withdrawals, etc. Basically move everything into their system so that people cannot store huge sums of money in their Paypal accounts. But how would they go about outlawing bitcoin ? I'm curious about the technical as well as political aspects of such an event. I think countries like Germany and Singapore may have been the first to realize that there isn't really much you can do to 'ban' bitcoin. You just have to play ball and then come up with solutions as problems come up. A move like China wouldn't be possible in Germany (maybe in Singapore though.. yes..).
  - PeterisP 13y ago
    As far as I know importing/exporting any currency in India is controlled, so unless it's explicitly permitted by the regulators, buying bitcoin can be treated as smuggling currency over the border without declaring it and (IANAL) it's a crime in India. How would they go about outlawing bitcoin? The same as cash deals, catch some of them and prosecute them harshly enough to scare others from making the practice widespread.
dobbsbob 13y ago
They raided him even though everything was through banks and already recorded, and you had to provide ID. His problem is he didn't bribe the right people I guess and they decided to steal his money.
rikacomet 13y ago
So the question is, would Bitcoin or any other online currency, accept the removal of anonymity, in order to stay legal. Legally, I do not know what law says, but logically, no country would accept such exchanges, unless they communicate the details of bitcoin exchanges, for tax purposes. As for paypal, though first part of their failure was due to RBI restrictions, they could have made a solution around it. There problem is more related their UI/UX now, nothing else. I would stand by RBI on this, regardless of what anyone thinks. Bitcoin, might be satisfactory enough for most tech savvy people, but for a average farmer, whose interest must be protected by RBI (as its duty), won't trust it. the author uses the word "opaque" in that sense. Have you ever tried to explain, how bitcoin stores money to a average Indian?
- andrewla 13y ago
  There's a common view that the anonymity of Bitcoin is a design goal, instead of it being a design artifact. Making a non-anonymous currency is extremely difficult, not least because the notion of "identity" is hard to define in a decentralized manner. Given that addresses exist and can be used to sign messages, Bitcoins are, to a significant extent, less anonymous than cash, which is already widely used.
  - rikacomet 13y ago
    but that brings us back to the same question asked again and again: What is the need for over the top anonymity? When were our hearts so fragile?
  - mindslight 13y ago
    This conversation is so fucking bizarre. Repeat after me: bitcoin is not anonymous. If anonymity was a design goal (and it should have been, because otherwise you don't actually have money), it didn't even attempt to address this goal.
    - dragonwriter 13y ago
      > If anonymity was a design goal (and it should have been, because otherwise you don't actually have money) Wait, what?
satanic_saint 13y ago
So, can anybody clearly tell/explain me this ? 1. Is holding BitCoin is legal/illegal in India ? 2. What about those who bought crypto from these raided exchanges ? 3. What if now I directly transfer BitCoin to a friend in USA as a gift. Is it legal after RBI Circular ? 4. What is Foreign Exchange Management Act, and is it a violation of FEMA if somebody buys BitCoins and stores it with them ? Sorry for asking questions in comments, but I'm a worried as hell :(
known 13y ago
To alleviate poverty, each state in India should have separate currency. http://www.lietaer.com/2010/03/the-worgl-experiment/ http://www.lietaer.com/2010/03/the-worgl-experiment/

67 points by chaitanya 13y ago

That DNA article has half-baked information. Here are some saner links: http://www.thehindu.com/business/Industry/bitcoin-exchanges-shut-shop-in-india/article5504407.ece http://www.thehindu.com/business/Industry/bitcoin-exchanges-... http://www.zdnet.com/in/bitcoin-exchanges-suspend-operations-in-india-amid-govt-warning-7000024648/ http://www.zdnet.com/in/bitcoin-exchanges-suspend-operations... >>>The central bank had, on Tuesday, issued a notice, warning the public of the risks involved with virtual currencies while claiming that it could be used for money laundering and funding anti-terrorism activities. It stopped short, however, of issuing a ban or any other restrictions. But still, I don't know what "framework" RBI wants to bring in, to "regulate" Bitcoins. From http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247 http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=3... >>>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.

rikacomet 13y ago
The framework for bitcoin, is under consideration. until a proper system is thought out, and formed. Bitcoin would retain its current status.
chaitanya 13y ago
Thanks for the links!

ashray 13y ago

Oh man, here we go again. The amount of FUD in this article is absolutely shocking! The Reserve Bank of India has not declared bitcoin as illegal [1]. The article certainly does insinuate that it is: A couple of days after the Reserve Bank of India issued an advisory to public not to indulge in buying-selling of Bitcoins, the first raid in India was undertaken in Ahmedabad by Enforcement Directorate (ED) on an entity that provide platform to trade in this illegal but virtual currency. I'm 100% certain that the website in question however was in violation of several KYC and AML norms as well as money exchange regulations, so the fact that they shut it down does make sense. It is sad more-so because the regulatory framework is extremely opaque and if I were to start a bitcoin business in India, I wouldn't know where to begin... The RBI has done a shitty job so far of regulating the Indian Rupee. I'm an Indian and my personal savings are now worth 30% less since 2009 on a global level (USD->INR went from Rs. 43 to a dollar to Rs. 62 now..). Internal inflation is at 10% YOY and there's no practical way to protect your money. Of course, I'm not implying that bitcoin is the solution to all these issues, just saying that on a personal level I do have issues with the way the RBI has managed (mismanaged?) our currency. [1] - http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247 http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?pr...

vellasib 13y ago
Correct, Calling Bitcoin as illegal is absolutely rubbish. They want to give Bitcoin the same treatment which they gave to PayPal that is, make it unusable.
kamaal 13y ago
RBI has mismanaged our currency? Sorry the global crude oil prices are soaring, thanks to sanctions on India's major oil supplier(Iran). Major world economies are in a state of war since the whole past decade. None of these are under RBI or Government of India's control. Yes there is corruption, but we are equal partners to that. In case you haven't noticed bulk of India's import business depends on software. There is massive anti-outsourcing wave, and at the same Indian start up industry hasn't really compensated for that. There is every reason why the government can be skeptical Bitcoin in India. We have massive tax evasion situation prevalent here. This is not a anti-technology anti-capitalism stance the government is having here. The public cheats on taxes so often, the government has 0 reasons why it should trust some thing new like Bitcoin.
- ashray 13y ago
  You are right that the entire blame for INR depreciation does not squarely sit on the shoulders of the RBI. It is a problem with reasons that go far beyond the control of the RBI. Yes, there is a huge current account deficit (export/import imbalance) and that is a big part of it. However, as the agency that manages the circulation and control of the currency, ultimately I look at the RBI as the 'face' of the Indian Rupee. That said, the government doesn't have to trust bitcoin. However, regulatory burden in India is extremely high regardless of the kind of business you want to start. India ranks poorly on several 'Ease of doing Business' indexes. [1] I'm bringing this up since you mentioned the start up industry. It's just not that easy to start something in India. Yes, tax evasion is a huge problem in India. But that's a cultural thing. The government has made it very hard to evade taxes (as long as you rely on existing banking channels) for now, but it doesn't really stop anyone. I can imagine that they are afraid that people will launder money by exchanging cash directly into bitcoin. However, why doesn't the government then go after the real estate business in India that normally takes 30%+ of the money in cash ? It is extremely hard to buy properties in resale unless you agree to pay a large percentage in cash. Oh wait, the government likes to put their black money into real estate. For the same reason as Real Estate, I highly doubt that the Indian government will ban bitcoin or make it illegal. They have plenty of money they would like to sink into this new genius asset class. They might however make it harder for regular people to get into it. Besides, you can always wire money to bitstamp and buy bitcoins as much as foreign exchange controls would let you. [1] - http://www.doingbusiness.org/rankings http://www.doingbusiness.org/rankings

vellasib 13y ago

I feel sorry for this guy. I've bought bitcoins from him in the past and I think he was doing a good job, at least for ensuring that his services are not used for money laundering. ID and address verification documents were needed and a copy of the PAN Card was also taken. Since all payments are made via bank accounts, It won't be difficult for ED to list out the bitcoin traders even if they were not collecting this information. I wonder how the website's users would be impacted.

rikacomet 13y ago
he is not arrested, he is under investigation. As you said, he documented all things, than, if there are no descrepencies, he would be allowed to function normally.
- spada 13y ago
  Do you honestly believe that's how things work in India?

anujkk 13y ago

What about those in India who traded using localbitcoins.com? Is there any possibility that they too can get into legal trouble or affected in some other way?

vellasib 13y ago
I don't see anyone getting into trouble, as long as the money which you used to purchase bitcoins from them was not already stained. Of course, people who bought using these sites might have the ED Scanner go over them, but again, nothing to worry unless you have undeclared assets or anything otherwise illegal. Indians can still do a wire transfer to MTGox and purchase bitcoins.
- jerguismi 13y ago
  I would not recommend mtgox, which is known about its delays with withdrawals, and has higher prices than other exchanges. Check out bitstamp, btc-e etc.
  - zachlatta 13y ago
    Mt. Gox's prices and delays tend to be specific to the US. I haven't heard of Mt. Gox troubles elsewhere.

wsxcde 13y ago

I see random people confidently asserting that btc isn't illegal in India. Don't listen to them. Talk to a tax lawyer. If you're in India, the sensible thing to do is to stay away from bitcoin. This is based on my conversations with my brother who is a tax lawyer. According to him the legality of btc and the laws that govern its purchase/sale in India aren't clear at all and there is an expectation that the RBI will clarify the regulatory framework and the laws that they believe apply to btc. He also believes that RBI has historically favoured extremely conservative interpretations so they will likely shoot down btc. This is obviously not legal advice, not least because it's coming through a lossy channel (me).

ashray 13y ago
This is interesting. So your brother thinks that in the near future the RBI will say that Buying bitcoin is a crime. Bitcoins will be the same as cocaine or .. well in India sex toys also share similar status. I personally find it quite unlikely that a democratic country will prohibit it's citizens from transacting in something like bitcoin. But hey, crazier things have been known to happen. However, I'd like to ask. Why preemptively assume that bitcoin will be declared illegal ? I can understand that the RBI is conservative and they forced Paypal to create automatic bank account withdrawals, etc. Basically move everything into their system so that people cannot store huge sums of money in their Paypal accounts. But how would they go about outlawing bitcoin ? I'm curious about the technical as well as political aspects of such an event. I think countries like Germany and Singapore may have been the first to realize that there isn't really much you can do to 'ban' bitcoin. You just have to play ball and then come up with solutions as problems come up. A move like China wouldn't be possible in Germany (maybe in Singapore though.. yes..).
- PeterisP 13y ago
  As far as I know importing/exporting any currency in India is controlled, so unless it's explicitly permitted by the regulators, buying bitcoin can be treated as smuggling currency over the border without declaring it and (IANAL) it's a crime in India. How would they go about outlawing bitcoin? The same as cash deals, catch some of them and prosecute them harshly enough to scare others from making the practice widespread.

dobbsbob 13y ago

They raided him even though everything was through banks and already recorded, and you had to provide ID. His problem is he didn't bribe the right people I guess and they decided to steal his money.

rikacomet 13y ago

So the question is, would Bitcoin or any other online currency, accept the removal of anonymity, in order to stay legal. Legally, I do not know what law says, but logically, no country would accept such exchanges, unless they communicate the details of bitcoin exchanges, for tax purposes. As for paypal, though first part of their failure was due to RBI restrictions, they could have made a solution around it. There problem is more related their UI/UX now, nothing else. I would stand by RBI on this, regardless of what anyone thinks. Bitcoin, might be satisfactory enough for most tech savvy people, but for a average farmer, whose interest must be protected by RBI (as its duty), won't trust it. the author uses the word "opaque" in that sense. Have you ever tried to explain, how bitcoin stores money to a average Indian?

andrewla 13y ago
There's a common view that the anonymity of Bitcoin is a design goal, instead of it being a design artifact. Making a non-anonymous currency is extremely difficult, not least because the notion of "identity" is hard to define in a decentralized manner. Given that addresses exist and can be used to sign messages, Bitcoins are, to a significant extent, less anonymous than cash, which is already widely used.
- rikacomet 13y ago
  but that brings us back to the same question asked again and again: What is the need for over the top anonymity? When were our hearts so fragile?
- mindslight 13y ago
  This conversation is so fucking bizarre. Repeat after me: bitcoin is not anonymous. If anonymity was a design goal (and it should have been, because otherwise you don't actually have money), it didn't even attempt to address this goal.
  - dragonwriter 13y ago
    > If anonymity was a design goal (and it should have been, because otherwise you don't actually have money) Wait, what?

satanic_saint 13y ago

So, can anybody clearly tell/explain me this ? 1. Is holding BitCoin is legal/illegal in India ? 2. What about those who bought crypto from these raided exchanges ? 3. What if now I directly transfer BitCoin to a friend in USA as a gift. Is it legal after RBI Circular ? 4. What is Foreign Exchange Management Act, and is it a violation of FEMA if somebody buys BitCoins and stores it with them ? Sorry for asking questions in comments, but I'm a worried as hell :(

known 13y ago

To alleviate poverty, each state in India should have separate currency. http://www.lietaer.com/2010/03/the-worgl-experiment/ http://www.lietaer.com/2010/03/the-worgl-experiment/