Sun, Dec 29, 2013 - Page 13 News List

Major Indian bitcoin operator suspends trade after warning

AFP, NEW DELHI

India’s biggest bitcoin trading platform said on its Web site on Friday that 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 Web site, adding that the move was “to protect the interest of our customers.”

The central bank’s warning came 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 advisory on Tuesday.

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

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

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 global financial crisis by a mysterious computer guru using the pseudonym Satoshi Nakamoto.

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 (US$776).

The US dollar worth of a bitcoin has rocketed from less than US$1 in 2010 to a US$1,200 peak earlier this month, but has since fallen back.

Various India-based bitcoin trading exchanges have emerged in the last few months, allowing Indian users to purchase bitcoin with rupees.

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.

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