India’s central bank gets to grip with Bitcoin

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Over Christmas, the Reserve Bank of India (RBI) finally published a comment warning the public about the dangers of dabbling in Bitcoin. Raids have followed, forcing websites that trade the virtual currency to suspend operations.

Enthusiasts have long hailed Bitcoin as a panacea for India’s economic problems, from low rates of financial inclusion to an unsustainable demand for gold. But even the most zealous Bitcoin miners admit that the future of the virtual currency lies with the regulator – which seems to be wary.

On December 24, the RBI said:

“The Reserve Bank of India has today cautioned the users, holders and traders of Virtual currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.”

The Enforcement Directorate, a finance ministry unit that investigates financial sector crime, has since raided and closed down Bitcoin exchanges.

But it is not only exchanges that have been affected. Nilam Doctor is an Indian member of the Bitcoin Foundation and runs a site offering information about the virtual currency and which allows people to accumulate small amounts of Bitcoin in one place – meaning they can take the tiny fractions (say 0.005 Bitcoin) gained by registering at online exchanges and put them together to form enough to start trading…. Read more

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