Numerous Indian bitcoin exchanges have pulled the plug and halted trading following a statement issued by the Reserve Bank of India (RBI) on Tuesday.
The RBI warning advised customers and investors to steer clear of bitcoin, citing numerous risks connected with digital currencies. The list of concerns outlined by the RBI was much more or much less standard – lack of regulation, safety troubles, rampant speculation and volatility. The RBI also pointed out that Indian bitcoin exchanges are operating without having regulatory approval, which is hardly surprising given the truth that India does not have a regulatory framework that would encompass digital currencies.
Services suspended temporarily or indefinitely
Just two days later many bitcoin operators in India chose to play it safe. They suspended trading, either temporarily or indefinitely. Bitcoin trading platform INRBTC stated it was suspending services indefinitely in light of RBI’s warning. It pointed out that RBI’s warning states parties involved in digital currency transactions could be topic to unintentional breaches of anti-cash laundering legislation and counter-terrorism laws.
INRBTC mentioned:
“The only option left now is suspend the services till further arrangements can be made,” INRBTC mentioned, 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 one hundred per cent to the customers.”
Another operator, buysellbitco.in, informed investors that it is suspending purchase and sell operations till it can outline a clearer framework with which to function.
“This is getting completed to shield the interest of our buyers and in no way is a reflection of bitcoin’s true potential or value,” buysellbitco.in said in a statement posted on its site.
The Hindu reports that numerous other bitcoin solutions in India have gone down. Some of their websites appear to be gone, too. However, other operators are carrying on and they are nonetheless providing rupee to bitcoin solutions.
Limitations
In its statement of 24th December, the RBI mentioned it is examining concerns related with digital currencies, namely trading, holding and use of digital currencies in India. Nevertheless, the RBI is restricted by existing legislation and since there is no indication that India will enact any new digital currency regulations, it is unclear what the RBI can do.
Essentially if the RBI chooses to apply India’s existing regulatory framework to bitcoin, that may entail the use of common foreign exchange regulations. This may force bitcoin exchanges to start off operating in significantly the exact same way as classic currency exchanges, but there is a issue. The typical bureau de alter deals only in national currencies, backed by central banks, using spot rates derived from large interbank transactions. It would be extremely challenging to apply regulations crafted for standard currency exchanges to digital currencies like bitcoin and it may even be not possible altogether.
The RBI is examining India’s payment method laws, also. It is clear that it will face comparable challenges if it tries to apply current payment laws. The vast majority of international transactions are handled by banks and they rely on SWIFT standards. Legislation tends to reflect this fact and legislation in this heavily regulated market is not what we would get in touch with flexible when it comes to international standards.
What subsequent?
At this point it is difficult to say no matter whether Indian exchanges that have decided to suspend trading will find a way of getting back into the game. Additionally it is unclear whether or not the exchanges that are nevertheless operating will stay open. Despite the fact that the RBI mentioned it is seeking into the matter, the reality that India does not have digital currency legislation remains a issue, especially if existing legislation is not practically applicable to digital currencies.
These events will undoubtedly create even much more volatility and uncertainty, especially in light of China’s clampdown earlier this month. It remains to be seen no matter whether the RBI and the Indian Ministry of Finance will push lawmakers to enact viable digital currency legislation.
As we reported earlier this month, India has a couple of region-specific issues that it would like to address, namely e-ponzi schemes and multi-level marketing and advertising schemes involving bitcoin. Employing unregulated digital currencies for such activities may well make it really hard to prosecute or even identify the culprits.
If a lot of folks fall victim to such schemes, they may possibly have fairly a couple of inquiries for regulators and lawmakers, offered digital currencies remain unregulated. The possible political fallout of undertaking nothing at all may possibly be embarrassing and also much to stomach for numerous lawmakers.
View Indian Bitcoin Exchanges Suspend Operations Following RBI Warning on CoinDesk.
Indian Bitcoin Exchanges Suspend Operations Following RBI Warning
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