A number of bitcoin operators in India have begun suspending their business following RBI’s warning against use of such virtual currencies due to potential money laundering and cyber security risks.

While RBI is yet to come out with a clear regulatory framework for bitcoins, which have been gaining currency across the world over the past few months, it has issued an advisory cautioning general public against use of bitcoins and other virtual currencies.

Within days of this advisory issued on December 24, a number of entities offering bitcoin services have suspended their operations, temporarily or indefinitely, while websites of a few others have gone down.

However, some other entities continue to run their operations of offering bitcoin exchange services for rupee and other currencies.

Bitcoin is a virtual currency that can be generated through complex computer software systems with solutions shared on a network, although the process is complex and such ’mining’ can be done only on very powerful servers.

Hardly three years into existence, bitcoin has already become the world’s most expensive currency and its per unit value soared past $1,000 level or about Rs 63,000 recently, although the prices have now slipped below Rs 50,000 level.

There was a phenomenal surge in the exchange rate for bitcoin from little over $200 to well past $1,000 during November, but there has been an extreme volatility since then and the RBI’s warning has further added to its woes in India.

One of the bitcoin operators in India, buysellbitco.in, has posted 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,” it said.

Another entity, INRBTC also said that “in light of RBI’s notice, services of INRBTC.com are being suspended indefinitely”.

Explaining its decision, INRBTC said that RBI has stated that users of virtual currencies are exposed to both legal and financial risks.

“Further it (RBI) states that 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 added.

“The only option left now is suspend the services until further arrangements can be made,” INRBTC said, while adding that 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,” it said.

Many other websites offering bitcoin services in India have gone down, although a few continue to operate as of now despite increasing regulatory glare on bitcoins globally.

(This article was published on December 26, 2013)
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