
First time in the country, ED raids a Bitcoin seller in Ahmedabad - chaitanya
http://www.dnaindia.com/india/report-first-time-in-the-country-ed-raids-a-bitcoin-seller-in-ahmedabad-1941187
======
ashray
Oh man, here we go again. The amount of FUD in this article is absolutely
shocking! The Reserve Bank of India has not declared bitcoin as illegal [1].
The article certainly does insinuate that it is:

 _A couple of days after the Reserve Bank of India issued an advisory to
public not to indulge in buying-selling of Bitcoins, the first raid in India
was undertaken in Ahmedabad by Enforcement Directorate (ED) on an entity that
provide platform to trade in this illegal but virtual currency._

I'm 100% certain that the website in question however was in violation of
several KYC and AML norms as well as money exchange regulations, so the fact
that they shut it down does make sense.

It is sad more-so because the regulatory framework is extremely opaque and if
I were to start a bitcoin business in India, I wouldn't know where to begin...

The RBI has done a shitty job so far of regulating the Indian Rupee. I'm an
Indian and my personal savings are now worth 30% less since 2009 on a global
level (USD->INR went from Rs. 43 to a dollar to Rs. 62 now..). Internal
inflation is at 10% YOY and there's no practical way to protect your money. Of
course, I'm not implying that bitcoin is the solution to all these issues,
just saying that on a personal level I do have issues with the way the RBI has
managed (mismanaged?) our currency.

[1] -
[http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?pr...](http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247)

~~~
kamaal
RBI has mismanaged our currency?

Sorry the global crude oil prices are soaring, thanks to sanctions on India's
major oil supplier(Iran). Major world economies are in a state of war since
the whole past decade. None of these are under RBI or Government of India's
control.

Yes there is corruption, but we are equal partners to that.

In case you haven't noticed bulk of India's import business depends on
software. There is massive anti-outsourcing wave, and at the same Indian start
up industry hasn't really compensated for that.

There is every reason why the government can be skeptical Bitcoin in India. We
have massive tax evasion situation prevalent here. This is not a anti-
technology anti-capitalism stance the government is having here. The public
cheats on taxes so often, the government has 0 reasons why it should trust
some thing new like Bitcoin.

~~~
ashray
You are right that the entire blame for INR depreciation does not squarely sit
on the shoulders of the RBI. It is a problem with reasons that go far beyond
the control of the RBI.

Yes, there is a huge current account deficit (export/import imbalance) and
that is a big part of it.

However, as the agency that manages the circulation and control of the
currency, ultimately I look at the RBI as the 'face' of the Indian Rupee.

That said, the government doesn't have to trust bitcoin. However, regulatory
burden in India is extremely high regardless of the kind of business you want
to start. India ranks poorly on several 'Ease of doing Business' indexes. [1]
I'm bringing this up since you mentioned the start up industry. _It 's just
not that easy to start something in India_.

Yes, tax evasion is a huge problem in India. But that's a cultural thing. The
government has made it very hard to evade taxes (as long as you rely on
existing banking channels) for now, but it doesn't really stop anyone. I can
imagine that they are afraid that people will launder money by exchanging cash
directly into bitcoin. However, why doesn't the government then go after the
real estate business in India that normally takes 30%+ of the money in cash ?
It is extremely hard to buy properties in resale unless you agree to pay a
large percentage in cash. Oh wait, the government likes to put their black
money into real estate.

For the same reason as Real Estate, I highly doubt that the Indian government
will ban bitcoin or make it illegal. They have plenty of money they would like
to sink into this new genius asset class. They might however make it harder
for regular people to get into it.

Besides, you can always wire money to bitstamp and buy bitcoins as much as
foreign exchange controls would let you.

[1] -
[http://www.doingbusiness.org/rankings](http://www.doingbusiness.org/rankings)

~~~
vellasib
The biggest concern they have is transactions which happen within Indian
users. They will get absolutely no information about it. Although when finally
someone realizes the money, it has to come to the bank, but taxes like Sales
Tax/Service Tax (think chain of transactions), which are based on the
transactions cannot be enforced.

~~~
ashray
But isn't that the same as selling something through OLX ?

I suppose the issue with buysellbitco.in was that it was missing some
paperwork that it should have had because they were accepting people's money
(INR) and selling bitcoins on a commercial scale.

I'm not sure why they said it violated foreign exchange acts though..

~~~
rikacomet
the statement issues by RBI earlier, said that anyone who would be found to be
dealing in bitcoin, would be considered violating FEMA. As someone said above,
money laundering is a big issue in India. On the financial side of things, it
is very hard even for seasoned "hawala" operators to launder any money.
Bitcoin is undoing that in Indian context, no matter how you see it.

And the fact the silkroad used bitcoin, doesn't help things either.

~~~
ashray

        the statement issues by RBI earlier, said that anyone who would be found to be dealing in bitcoin, would be considered violating FEMA
    

Where is this statement ? I only have:
[http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?pr...](http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247)

Was there another statement from the RBI ?

~~~
rikacomet
Its there

"The absence of information of counterparties in such peer-to-peer anonymous/
pseudonymous systems could subject the users to unintentional breaches of
anti-money laundering and combating the financing of terrorism (AML/CFT) laws.
"

anti-money laundering = FEMA, there is no law called AML, there are two laws:
FEMA & PMLA. As per the investigation, the right clauses are applied.

------
wsxcde
I see random people confidently asserting that btc isn't illegal in India.
Don't listen to them. Talk to a tax lawyer.

If you're in India, the sensible thing to do is to stay away from bitcoin.
This is based on my conversations with my brother who _is_ a tax lawyer.
According to him the legality of btc and the laws that govern its
purchase/sale in India aren't clear at all and there is an expectation that
the RBI will clarify the regulatory framework and the laws that they believe
apply to btc. He also believes that RBI has historically favoured extremely
conservative interpretations so they will likely shoot down btc. This is
obviously not legal advice, not least because it's coming through a lossy
channel (me).

~~~
ashray
This is interesting. So your brother thinks that in the near future the RBI
will say that _Buying bitcoin is a crime._

Bitcoins will be the same as cocaine or .. well in India sex toys also share
similar status.

I personally find it quite unlikely that a democratic country will prohibit
it's citizens from transacting in something like bitcoin. But hey, crazier
things have been known to happen.

However, I'd like to ask. Why preemptively assume that bitcoin will be
declared illegal ?

I can understand that the RBI is conservative and they forced Paypal to create
automatic bank account withdrawals, etc. Basically move everything into their
system so that people cannot store huge sums of money in their Paypal
accounts.

But how would they go about outlawing bitcoin ? I'm curious about the
technical as well as political aspects of such an event.

I think countries like Germany and Singapore may have been the first to
realize that there isn't really much you can do to 'ban' bitcoin. You just
have to play ball and then come up with solutions as problems come up. A move
like China wouldn't be possible in Germany (maybe in Singapore though..
yes..).

~~~
PeterisP
As far as I know importing/exporting any currency in India is controlled, so
unless it's explicitly permitted by the regulators, buying bitcoin can be
treated as smuggling currency over the border without declaring it and (IANAL)
it's a crime in India.

How would they go about outlawing bitcoin? The same as cash deals, catch some
of them and prosecute them harshly enough to scare others from making the
practice widespread.

~~~
Aqueous
Well, a long-term ban on personal BitCoin usage (i.e. merely mining and
sending/receiving) is unenforcable. More likely a ban would target the
commercial means of acquiring BitCoin. So mining enterprises and exchanges and
payment processors would be the targets of any ban just like in China with the
latter two. If you make it impractical to buy or otherwise obtain BitCoins
then you've as good as outlawed it, allowing only small, black market, person
to person exchanges.

------
swatkat
That DNA article has half-baked information. Here are some saner links:

[http://www.thehindu.com/business/Industry/bitcoin-
exchanges-...](http://www.thehindu.com/business/Industry/bitcoin-exchanges-
shut-shop-in-india/article5504407.ece)

[http://www.zdnet.com/in/bitcoin-exchanges-suspend-
operations...](http://www.zdnet.com/in/bitcoin-exchanges-suspend-operations-
in-india-amid-govt-warning-7000024648/)

 _> >>The central bank had, on Tuesday, issued a notice, warning the public of
the risks involved with virtual currencies while claiming that it could be
used for money laundering and funding anti-terrorism activities. It stopped
short, however, of issuing a ban or any other restrictions._

But still, I don't know what "framework" RBI wants to bring in, to "regulate"
Bitcoins. From
[http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=3...](http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247)

 _> >>The Reserve Bank has also stated that it is presently examining the
issues associated with the usage, holding and trading of VCs under the extant
legal and regulatory framework of the country, including Foreign Exchange and
Payment Systems laws and regulations._

~~~
rikacomet
The framework for bitcoin, is under consideration. until a proper system is
thought out, and formed. Bitcoin would retain its current status.

------
satanic_saint
So, can anybody clearly tell/explain me this ? 1\. Is holding BitCoin is
legal/illegal in India ? 2\. What about those who bought crypto from these
raided exchanges ? 3\. What if now I directly transfer BitCoin to a friend in
USA as a gift. Is it legal after RBI Circular ? 4\. What is Foreign Exchange
Management Act, and is it a violation of FEMA if somebody buys BitCoins and
stores it with them ?

Sorry for asking questions in comments, but I'm a worried as hell :(

------
vellasib
I feel sorry for this guy.

I've bought bitcoins from him in the past and I think he was doing a good job,
at least for ensuring that his services are not used for money laundering.

ID and address verification documents were needed and a copy of the PAN Card
was also taken.

Since all payments are made via bank accounts, It won't be difficult for ED to
list out the bitcoin traders even if they were not collecting this
information. I wonder how the website's users would be impacted.

~~~
rikacomet
he is not arrested, he is under investigation. As you said, he documented all
things, than, if there are no descrepencies, he would be allowed to function
normally.

~~~
spada
Do you honestly believe that's how things work in India?

------
anujkk
What about those in India who traded using localbitcoins.com? Is there any
possibility that they too can get into legal trouble or affected in some other
way?

~~~
vellasib
I don't see anyone getting into trouble, as long as the money which you used
to purchase bitcoins from them was not already stained.

Of course, people who bought using these sites might have the ED Scanner go
over them, but again, nothing to worry unless you have undeclared assets or
anything otherwise illegal.

Indians can still do a wire transfer to MTGox and purchase bitcoins.

~~~
jerguismi
I would not recommend mtgox, which is known about its delays with withdrawals,
and has higher prices than other exchanges. Check out bitstamp, btc-e etc.

~~~
zachlatta
Mt. Gox's prices and delays tend to be specific to the US. I haven't heard of
Mt. Gox troubles elsewhere.

------
rikacomet
So the question is, would Bitcoin or any other online currency, accept the
removal of anonymity, in order to stay legal.

Legally, I do not know what law says, but logically, no country would accept
such exchanges, unless they communicate the details of bitcoin exchanges, for
tax purposes.

As for paypal, though first part of their failure was due to RBI restrictions,
they could have made a solution around it. There problem is more related their
UI/UX now, nothing else.

I would stand by RBI on this, regardless of what anyone thinks. Bitcoin, might
be satisfactory enough for most tech savvy people, but for a average farmer,
whose interest must be protected by RBI (as its duty), won't trust it.

the author uses the word "opaque" in that sense. Have you ever tried to
explain, how bitcoin stores money to a average Indian?

~~~
andrewla
There's a common view that the anonymity of Bitcoin is a design goal, instead
of it being a design artifact. Making a non-anonymous currency is extremely
difficult, not least because the notion of "identity" is hard to define in a
decentralized manner.

Given that addresses exist and can be used to sign messages, Bitcoins are, to
a significant extent, less anonymous than cash, which is already widely used.

~~~
mindslight
This conversation is so fucking bizarre. Repeat after me: bitcoin is not
anonymous. If anonymity _was_ a design goal (and it should have been, because
otherwise you don't actually have _money_ ), it didn't even attempt to address
this goal.

~~~
dragonwriter
> If anonymity _was_ a design goal (and it should have been, because otherwise
> you don't actually have _money_ )

Wait, what?

------
known
To alleviate poverty, each state in India should have separate currency.
[http://www.lietaer.com/2010/03/the-worgl-
experiment/](http://www.lietaer.com/2010/03/the-worgl-experiment/)

------
dobbsbob
They raided him even though everything was through banks and already recorded,
and you had to provide ID. His problem is he didn't bribe the right people I
guess and they decided to steal his money.

