Bitcoin traders shut operations after RBI warns against use of virtual currencies

Bitcoin operators in India have temporarily shut down operations after Reserve Bank of India (RBI) issued a warning against the use of virtual currencies, including Bitcoin in the country.

Among the ones who have suspended operations include BuySellBitco.in and NRBTC. The development was first reported by news agency PTI.

BuySellBitco.in, run by Gandhinagar-based Seven Digital Cash LLP based out of Gandhinagar, said in a post on its website, “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.”

BuySellBitco.in, which used to generate around Rs 10-20 lakh turnover per month a few months ago, recently hit monthly turnover of around Rs 1 crore, with the surge in Bitcoin prices.

The price of Bitcoin has been fairly volatile this year rising over five times in less than two months to cross $1,000 last month only to see its value shrink by a third since then.

Another player affected by the RBI note is which said in a communication to its users, “Dear users, in light of RBI's notice the services of are being suspended indefinitely. All trades which have been executed till December 26, 2013, will be processed completely. All pending orders will be cancelled and the deposits on those orders will be refunded 100 per cent to the users.”

Early this week, RBI issued a warning that the creation, trading or usage of virtual currencies including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority.  â€œNo regulatory approval, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities. As such, they may pose several risks to their users,” according to RBI.

The central bank stated that users of virtual currencies are exposed to both legal and financial risks and the absence of information of counterparties could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.

It said that it is examining the issues associated with the usage, holding and trading of such virtual currencies under the existing legal and regulatory framework of the country, including foreign exchange and payment systems laws and regulations.