Bitcoin traders under ED scanner

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BitcoinMUMBAI- Soon after the Reserve Bank of India warning on bitcoin trading in India, the Enforcement Directorate (ED) conducted its first searches on a bitcoin trader in Ahmedabad.

Searches were conducted on Seven Digital Cash LLP which owns a bitcoin website based in Ahmedabad.

“We have conducted searches at 2-3 locations of Seven Digital Cash LLP and its website. The company was involved in buying and selling of bitcoins in India, operating from Ahmedabad,” an ED official confirmed.

Under the Foreign Exchange Management Act (FEMA), ED is taking action on suspicion that “these bitcoin traders might be doing hawala transaction in the name of virtual currency trading.”

An ED official says, “We have started our searches with Ahmedabad – which is also the major base of bitcoin traders, but in the coming days our other teams could conduct similar searches on other companies and websites involved in bitcoin trading in various other metro cities.”

Bitcoin, an electronic currency that is minted in the cyberspace and stored in digital wallets, is encouraging entrepreneurs, venture capitalists and technology enthusiasts to invest their money in businesses that use bitcoins to buy and sell goods on the internet.

However, off late, RBI had issued a press release cautioning user about the potential financial, operational, legal security risks in bitcoin trading.

In its release, RBI has said that creation, trading or usage of ‘Decentralised Digital Currency’ or ‘Virtual Currency’ (VCs), including Bitcoins, litecoins, bbqcoins and dogecoins as a medium for payment are not authorised by any central bank or monetary authority.

“No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying out such activities,” RBI said, adding that it is keeping tabs on the developments. Stating that virtual currencies have no underlying or backing of any assets and their value seems to be a matter of speculation.

“The users are exposed to potential losses on account of volatility in value.” Since VCs are stored in digital or electronic media, called electronic wallets, they are prone to losses arising out of hacking, loss of password, compromise of access credentials and malware attack, the RBI cautioned.

On the other hand, founded in 2009, bitcoin is not issued by any central bank but by an open source software through a process called ‘mining’.

As of now, India has a 50,000-strong bitcoin community, with at least 30,000 of them owning the digital currency, according to bitcoin enthusiasts and observers in the country.

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