Authorities Swoop Down on India's Biggest Trading Platform

Indian authorities have carried out the first bitcoin raid in the country, targeting's offices in Ahmedabad.

AccessTimeIconDec 27, 2013 at 2:45 p.m. UTC
Updated Sep 10, 2021 at 12:05 p.m. UTC
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Just three days after the Reserve Bank of India (RBI) issued a public advisory which warned against the use and trade of digital currencies, authorities have carried out the first bitcoin raid in the country.

In Ahmedabad, the Enforcement Directorate (ED) raided the premises of Mahim Gupta, the man behind India's biggest trading platform, A separate raid was carried out in another part of the city, although the authorities do not appear to have found the second suspect in the office.

Violation of foreign exchange regulations

During the preliminary investigation, the Enforcement Directorate found that was in clear violation of the Foreign Exchange Management Act, reports DNA India.

“We have found that through the website 400 persons have recorded 1,000 transactions that amount to a few crores of rupees. We are gathering the data of the transactions, name[s] of the people who have transacted in the virtual currency from Gupta’s server that is hired in the US,” said an ED official.

“At present, we believe that this is a violation of foreign exchange regulations of the country. If we are able to establish [a] money laundering aspect then he can be arrested.”

Authorities estimate the total volume of transactions on was between Rs20-30 crore, or $3.2 to $4.8m. The unnamed ED official said:

“The biggest threat is that without recording your transaction in [an] official foreign currency platform, money can be transferred like hawala with the use of this transaction. We are examining such instances, if any, here.”

Unregulated transfers

Hawala is an honour-based informal money transfer system regulated by Islamic jurisprudence centuries ago, but in recent years it has come under a lot of scrutiny by national regulators in the Middle East and the Indian subcontinent.

Since it is informal and unregulated, over the last few decades it has been employed to circumvent international sanctions, launder illicit opium trade revenue and move cash between paramilitary and terrorist groups.

It's easy to see why Indian authorities would feel less than enthusiastic about a digital version of hawala powered by the Bitcoin protocol.

However, although it was operating without regulatory approval, which is true of all bitcoin trading platforms based in India, there is no indication that it was involved in money laundering at this point.

For the time being, Indian bitcoin operators appear to be taking the wait-and-see approach. On Wednesday, announced that it would suspend operations following the RBI statement. INRBTC also said that it would suspend its services indefinitely. Unocoin also followed suit.

Potential fallout

India is a not a significant bitcoin hub, but with its huge population and booming economy it is potentially an immense untapped market, especially for foreign remittances.

The raid indicates that the RBI warning is more than a simple advisory. For all intents and purposes, exchanging bitcoins for rupees in India is illegal, as it is impossible to get regulatory approval.

As CoinDesk noted yesterday, India faces a number of region-specific concerns that will not be easy to address. The question is whether anyone will be willing to address them at all.

In other words, if nothing changes Indian bitcoin exchanges will remain closed. This does not necessarily mean that anyone using bitcoin in India will be breaking the law, but it will have a significant effect on bitcoin adoption in India.


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