Friday, December 27, 2013

BitCoin news and views December 27 - 28 , 2013 - Pro and Con news and views on BitCoin.......


FinCEN: Bitcoin Miners Need Not Register as Money Transmitters

 (@southtopia) | Published on December 29, 2013 at 10:55 GMT | MiningNews,RegulationUS & Canada

Bitcoin miners who mine “for themselves” do not have to register as Money Services Businesses(MSBs) with the US Financial Crimes Enforcement Network (FinCEN), according to an official letter from the agency this week.
FinCEN was replying to a request for clarification by Atlantic City Bitcoin(AC Bitcoin), aka advocate Milly Bitcoin, who maintains an array of ASIC miners in New Jersey. According to the letter, miners are still free to purchase goods or trade with exchanges with the bitcoins they produce whether operating as individuals or businesses.
The news should come as a relief for smaller-scale mining operations. Jerry Brito, senior research fellow at  the Mercatus Center, indicated that FinCEN wrotein a private letter last July that all miners would have to register as MSBs, and uncertainty had remained since then.
This could have put many individuals out of the mining business with its range of compliance regulations, such as having an auditor on staff. AC Bitcoin has been in regular contact with FinCEN in 2013 and pointed out that any necessity for miners to register as MSBs would require a public statement to that effect under the US Administrative Procedures Act.
AC Bitcoin said FinCEN’s explanation was satisfactory enough for small miners at the moment, and showed FinCEN now had a greater understanding of bitcointhan in March, which was a positive sign.
The exact wording of the letter still leaves some room for interpretation, though, and its ramifications could hinge on words like “disposing” of bitcoin or “transmitter” of money in many cases. This could be deliberate to allow prosecution of individual cases at some later stage, but FinCEN’s letter does clearly state it does not consider AC Bitcoin a “money transmission service” under its rules.
The letter stated:
“In undertaking such a conversion transaction, the user is not acting as an exchanger, notwithstanding the fact that the user is accepting a real currency or another convertible virtual currency and transmitting Bitcoin, so long as the user is undertaking the transaction solely for the user’s own purposes and not as a business service performed for the benefit of another. A user’s conversion of Bitcoin into a real currency or another convertible virtual currency, therefore, does not in and of itself make the user a money transmitter.”
What is still not clear is how MSB or money transmission regulations will apply to larger operations or companies selling hosted mining contracts, like Cloud Hashing, Cointerra’s TerraMine Hosting or Butterfly Labs’ Hosted Mining. Users on reddit also engaged in debate over what it might mean for mining pools. Such groups generally distribute mined bitcoins amongst themselves but they vary in size and complexity of their arrangements.

(  Vampire squid heavy hitter and current  director on board at BitCoin Start Up Firm Circle Internet Financial  )

Goldman Sachs Director to Join Board of Bitcoin Startup Circle

 (@southtopia) | Published on December 28, 2013 at 12:09 GMT | CompaniesExchanges,NewsStartups

Goldman Sachs board member M. Michele Burns is joining the board of new bitcoin payment processor Circle Internet Financial, becoming the latest representative from the worlds of big finance and investing to show an interest in digital currency.
The move represents a possible greater acceptance of bitcoin in the US in the financial mainstream, at a time when other large countries are attempting to block or caution against its use.
Burns is also a Director at Cisco Systems Inc., and previously sat on the board at Wal-Mart Stores Inc. Her involvement in the finance industry goes back to 1981, and she has also been Executive Vice President and Chief Financial Officer of insurance brokerage Marsh & McLennan, and Chairman and CEO of consultancy firm Mercer.
She has also supported Democratic politicians Al Gore and Hillary Clinton, sits on the Boards of Trustees at the Atlanta Symphony Orchestra and the Elton John AIDS Foundation, and is a Strategic Advisor at the Stanford Center on Longevity.
Circle has been a favorite with big investors since its launch last October, making headlines with the largest ever Series A investment in a bitcoin company of $9m from well-known tech investors such as Jim Breyer, Accel Partners and General Catalyst Partners.
Part of the appeal is Circle’s CEO Jeremy Allaire, previously CEO of online video platform Brightcove and Allaire Corporation, creator of the ColdFusion development language before its acquisition by Macromedia in 2001.
He has described bitcoin as “a totally transformational technology” that could be as significant as email or Skype. Circle aims to be a business and regulator-friendly payment processor similar to BitPay and Coinbase, but has not fully unveiled its services as yet.
Allaire also fronted the US Senate Committee hearings on bitcoin in November, saying bitcoin had to live with the realities of a regulatory environment, but also suggesting the regulatory burden on financial services was too high when compared to other startups in the tech sector.


Bitcoin Catches Attention Of Goldman Sachs (And Walmart, And Cisco): Goldman Director Joins Bitcoin Startup

Tyler Durden's picture

When Bitcoin fans were hoping for fast track adoption by the mainstream, catching the attention of the all-seeing eye of SauronGoldman Sachs was probably low on their list of demands. Yet that is precisely what they got with the arrival of a Goldman Sachs board member M. Michele Burns, who recently joined the board of Boston-based Bitcoin payment processing system startup Circle Internet Financial.
As Fortune reports "Circle launched earlier this year, and was founded by Jeremy Allaire, who has led other Internet start-ups, but recently has become a Bitcoin evangelist. The company got $9 million in funding from a number of venture capitalist firms. Jim Breyer, a partner at Accel and an early backer of Facebook (FB), is also on Circle's board, as is Raj Date, who recently left a top post at the Consumer Financial Protection Bureau. Circle declined to comment about Burns. Two sources with knowledge of her move confirmed it."
Perhaps of same or greater importance is that in addition to being the chair of the audit committee at the preeminent FDIC-backed hedge fund, Burns also was a board member of the largest retailer in the world, Walmart (WMT accepting BTC?), and is currently on the board of the one company that is at the nexus of the Internet economy, Cisco (and which was punished furiously following Snowden's NSA-spying revelations after projected Chinese revenues imploded and that Cisco may or may not have been collaborating with the government in leaking private data).
In fact, when one considers that in the face of Burns, Circle's proximity to Bitcoin now allows no less than three of the preeminent companies of the old and new economy to keep a close eye on the digital currency and one must be either very excited about the future of BTC.... or very worried. Because if escape from the mainstream is the main target behind the Bitcoin movement, this could be problematic now that Goldman, Cisco and Walmart are all starting to sniff around.
Why a Bitcoin transaction processing company? Simple - these companies are the middlemen that will allow much broader acceptance of BTC by merchants. Consider this in the context of the recent announcement by Overstock that it would begin accepting Bitcoin by mid-2014:
Currently 12.1 million Bitcoin are in circulation, with a total value of about $8.8 billion. At this size, the value of Bitcoin can fluctuate violently based on actions by a few big investors or the Chinese government. This is a problem: If a retailer saves 3 percent on credit card transactions, but the value of Bitcoin loses 5 percent before the retailer can convert it back into dollars, the concept will quickly lose its luster.

Bitcoin-processing companies such as Bitpay and Coinbase take on this risk for merchants, offering to convert Bitcoin into U.S. dollars immediately. But they might not be able to handle that risk if any serious slice of Overstock’s transactions comes in Bitcoin, says Barry Silbert, the founder and chief executive of SecondMarket and an investor in both companies. “When you start talking to companies like Overstock or Amazon, they’d only be able to guarantee those rates to a certain transaction amount,” he says. Bitpay processed $100 million in transaction in 2013. “I think the system is going to expand as quickly as it needs to,” says Stephanie Yargo, the company’s vice president of marketing.
Well, maybe not Bitpay, but its competitors such as Circle might, especially if directly or indirectly backed by the balance sheet of, say, Goldman Sachs, especially if in some joint venture with Walmart. Because whereever the money is, either fiat or digital, one can be sure to find Goldman.
M. Michele Burns
Director Since: October 2011 
Committees: Chair, Audit Committee; member of all other standing committees

Other Current Public Company Directorships:Cisco Systems, Inc. 
Other Public Company Directorships within past 5 years: Wal-Mart Stores, Inc. 

Career Highlights

  • Chief Executive Officer, Retirement Policy Center, sponsored by Marsh
    & McLennan Companies, Inc. (MMC); Center focuses on retirement
    public policy issues (October 2011 - Present); Center Fellow and
    Strategic Advisor, Stanford University Center on Longevity (August 2012 -
  • Chairman and Chief Executive Officer, Mercer LLC, a subsidiary of MMC
    and a global leader in human resource consulting, outsourcing and
    investment services (September 2006 – early October 2011)
  • Chief Financial Officer, MMC, a global professional services and consulting firm (March 2006 – September 2006)
  • Chief Financial Officer, Chief Restructuring Officer and Executive
    Vice President, Mirant Corporation, a competitive energy company (May
    2004 – January 2006)
  • Executive Vice President and Chief Financial Officer, Delta Air
    Lines, Inc., an air carrier, which filed for protection under Chapter 11
    of the United States Bankruptcy Code in September 2005 (including
    various other positions, 1999 – April 2004)
  • Senior Partner and Leader, Southern Regional Tax Practice, Arthur
    Andersen LLP, an accounting firm (including various other positions,
    1981 –1999)

Other Professional Experience and Community Involvement

  • Board member and Treasurer, Elton John AIDS Foundation

Experience and Qualifications

As the former Chief Financial Officer of several global public
companies, Ms. Burns brings to our Board substantial expertise in
accounting and the review and preparation of financial statements, which
she draws upon as our Audit Committee Chair. In addition, as the former
CEO of Mercer LLC, Ms. Burns brings to our Board her experience in
human capital management and strategic consulting, which assists
our Board in its oversight of our firm’s strategy. Through her service
on the boards of directors and board committees of other public
companies and not-for-profit entities, Ms. Burns has developed
additional leadership and corporate governance expertise.

( focusing on security is good ...... )

5 Security Tips for Bitcoin Beginners

 (@davidgilson) | Published on December 28, 2013 at 07:05 GMT | AnalysisLifestyle,Wallets

Bitcoin makes moving money across the internet incredibly easy, but that ease comes with risks.
There are plenty of ways someone can take your money, track your spending, or violate your privacy.
Fortunately, there are also some straightforward measures you can take to safeguard your digital currency and keep your spending habits private. Here are our top five tips to protect your bitcoins:

1. Keep separate wallets

If the wallet you use for spending bitcoin also contains your entire bitcoin holdings, your savings will be vulnerable to various types of abuse.
There is no limit to the number of bitcoin addresses (or wallets) that one person may have.
Therefore, you could easily have an address for spending money, an address for savings and even an address for receiving payments.

2. Don’t keep your savings in a web wallet

Recently, there have been several cases of web wallets being hacked and subsequently emptied.
While web wallets are convenient, they should only be used like a checking/current account – as a place to store money you will be using in the near future. Thus, if you only keep a small amount of spending money in a wallet that gets hacked, your losses will be limited.
Remember, bitcoin does not work like a credit card. If you lose money fraudulently, that money is gone and there is nobody you can send a refund claim to. You can always contact the police, but it’s unlikely they’ll be able to get your bitcoins back.
Screenshot 2013-11-25 17.14.47

3. Protect your privacy

Above anything else, remember – never share your private keys with anyone else. If your wallet address (ie your public key) is the equivalent of your bank account number, then your private wallet key is your PIN.
Thanks to taint analysis, it’s possible to work out which bitcoin wallets are likely to be owned by the same person because of their transaction history.
If you have a ‘spending’ wallet and a ‘savings’ wallet, regular transactions between the two will provide a pretty clear signal to hackers which one is the address of your savings wallet.
Illegal activities aside, there is a legitimate reason to obscure that relationship, as it could allow someone to investigate how many bitcoins you have, which is something that should remain private. Would you reveal all of your financial details to a stranger?
The best way to obscure the relationship between your wallets is to transfer funds between them via a mixing service.

4. Cold Storage

Even if you keep your bitcoins in a wallet stored on your computer, you’re still vulnerable to an attack. Bitcoin wallet applications save their data in a predictable location, thus they are particularly vulnerable to Trojan horse attacks.
Such attacks have been reported by bitcoin users. A common solution is to keep your wallet’s private key stored in an offline medium as an added layer of protection. This offline medium could simply be a QR code printed on a piece of paper or a plain text file stored on a USB key.
If you want to transfer bitcoins from an offline wallet to someone/somewhere else, you would first need to scan the QR code or enter the wallet’s private key manually into an application like Blockchain. Once the application has displayed the balance of your wallet, you will be able to transfer bitcoins to the wallet address of your choice.
As an added measure, you could encrypt your private keys so that if they were discovered, they’d be useless without your encryption password – just don’t forget your password!

Screenshot 2013-11-25 17.26.14

5. Backup!

While the other tips on this list have been about protecting your bitcoin fortune from other people, this one is all about protecting against yourself.
Assuming you are using a desktop client to store your bitcoin wallets, there should be an option to back up your wallet(s). Again, instructions will vary depending on your client.
By using such features, the public and private key to your wallet will be saved into a file. That’s all any bitcoin wallet needs to retrieve your balance, as the actual value attached to your bitcoin addresses are stored as data on the block chain, not on your wallet application.
Once you have a file containing your wallet keys, you can put this anywhere: flash drive, optical disk, portable hard drive, on paper, etc.
You can even store these files on a cloud-based backup system like Dropbox, which offers robust data reliability. However, given that no cloud system is 100% safe, it would be wise to encrypt such data before uploading, Truecrypt is one such tool that can encrypt your wallet files.

One more thing…

Another example of a secure cold storage wallet is something called a ‘brain wallet’. This is essentially a secret combination of words and numbers you carry around in your head. When you enter your passphrase into a site like brainwallet, it will unscramble it so you can obtain your private key. For more information read our brain wallet guide.


Bitcoin for Big Dummies: Why The Digital Currency Is Spiking & Why It's Not A Bubble

Reggie Middleton's picture

2014 is set to be a banner year for BoomBustBlog. As you may have noticed, positings have slowed down to almost nothing. This due to another battle with hackers on the server. As we bounce back, we will take the global macro world by storm. This includes the digital currencies and how they will affect the world as we know it.
I have recorded a brief simple video to explain my perspective on digital currencies. Let it be known to all who don't normally follow me: I'm not a gold bug, I'm not crypto-currency bug, I'm a risk-adjusted return bug! I attempt to see things as they truly are and will call it as I see it. Those of you who instanteously dismiss Bitoin as a bubble or Ponzi scheme are likely doing so without taking the time to fully understand it (it is quite different, I must admit), or read the disruptive change that it's capable of bringing into play - a disruptive change at the level of the Internet and World Wide Web during the the early to late 90's. For an example of this broad based, yet widely followed misunderstanding, reference The "Anti-Economist" Calls Bitcoin the A…

Now, there's no doubt that Bitcoin has been on a tear as of late, after all...
image012 image012  
The vast majority of that 6 digit (that's right, "Six" digit) return has occurred within the last year.
The most likely reason stems from media exposure. Please note that I don't think it's due to media exposure, it stems from it. You see, as explained in the short video below, Bitcoin's primary value stems from its inherent ability to truly and absolutely circumvent the gate keepers of monetary value today - the Central and Money Center Banks of the world.

Basically, the gatekeepers of money can now have the locks on their gates picked. The tertiary value is that this new money is "programmable," but more on that later. The more people who realize the value of this new, finite, cryptographic money, the higher the demand pushes the value of the money. 
Do I have a point? Well, look at it from obscurity in 2010 to media darling in 2013 - Yes! All 391,288% worth of appreciation!  


Mobile Nations Reports Surge in Popularity for Bitcoin Payments

 | Published on December 27, 2013 at 06:20 GMT | LifestyleMerchantsNews


Mobile Nations, a leading provider of ‘all things mobile’, started accepting bitcoin payments in early December. So far, the currency has proved to be a success for the retailer.
Mobile Nations operates store fronts such as ShopAndroid,ShopCrackberryWindows Phone Central and, of course, the iMore Store. All four stores have been accepting bitcoin since 3rd December.
But how many of its consumers are actually using bitcoin?
Mobile Nations’ chief media officer Kevin Michaluk told CoinDesk that a relatively small amount of payments were made in bitcoin, roughly 0.004% of total orders. However, the average size of a bitcoin order is significantly higher than orders via other methods.
“The single largest order placed in our stores in December was actually paid for with bitcoin,” said Michaluk.
He pointed out that Mobile Nations decided to start accepting bitcoin payments in response to demand from the community:
“When our customers ask for something, we take it seriously. We had been receiving requests to accept bitcoin for the past six months or so, on a steady but fairly limited basis.”
Michaluk added that as the value of bitcoin surged in late 2013, calls to introduce bitcoin payments grew louder. Since the surge coincided with the holiday shopping season, Mobile Nations decided to add support for the virtual currency.
“Our tech team looked into the requirements and merchant services available and found the process to be straightforward. Implementation was easy, and a few days later we were ready to accept Bitcoin,” he said.
On the user-end, the system is straightforward. All consumers need to do is add an item to their cart and click the ‘Pay with bitcoin’ button, hassle free.
When asked to comment on the future of bitcoin, Michaluk was cautious. He said he still does not know what the future holds for bitcoin, but he stressed that there is a real community movement behind bitcoin and many customers are asking for bitcoin support.
Mobile Nations was happy to oblige and become part of the bitcoin story.

New York Property Firm Offers Steep Discount For Bitcoin Payments

 (@joonian) | Published on December 25, 2013 at 11:55 GMT | CompaniesLifestyle,NewsStartups

A property listings site in the US has started giving a large discount to users who advertise on the site and pay in bitcoin. The listings site, called RentHop, is offering landlords and agents who advertise properties in New York a discount of up to 60% if they pay for their adverts in bitcoin. The site currently has about 87,000 listings for New York.
RentHop customers pay for ads with credits purchased from the site. The smallest package of credits available is 15, which costs $6 and the largest package is 300 credits at $75. Bitcoin users get 60% off the smallest package and about 40% off the largest one.
RentHop’s co-founder Lawrence Zhou said bitcoin payments would help solve some of the niggling problems in the New York property business, like tenants having to obtain a cashier’s check to pay the deposit on a lease. He said:
“In New York, you have to go out of your way to get cashier’s checks, for example. And there’s always a fee associated with that, which makes it pretty annoying. It’s $10 for each check. Even having to go out to your local bank and getting the check is really obnoxious.”
Zhou added that bitcoin transactions also removed the possibility of chargebacks on credit card payments, which was another minor issue he has to deal with regularly. He said that the property industry is generally slow to adopt new technology and he hoped that bitcoin payments would encourage quicker uptake of new technologies like digital currency.
“The industry is always a little bit un-tech-savvy, so it would be great if we could be a catalyst,” he said.
Bitcoin payments had been live for less than a day when CoinDesk interviewed Zhou. He said that he had already received several inquiries about paying in bitcoin. Most of the inquiries were from people who had never dealt in the digital currency before, so they required basic information like how to obtain and store bitcoin.
The RentHop users appear to have been attracted by the large discount for bitcoin payments. But so far, no RentHop customer has bought advertising credits with bitcoin yet. Zhou said:
“We made the discount large so that people will take it. We wanted to try and entice them.”
RentHop sells itself on an algorithmically calculated ‘HopScore’, which is meant to simplify the search process for people seeking a property. A property with a HopScore of 100, for example, might have received a high score because the agent listing it responded to messages quickly, the listing had the full complement of information, and the property itself matched a verified address in the city.
Perhaps fittingly for a website built on algorithms, its co-founder is an avid investor in algorithmically mined cryptocurrencies. Zhou started investing in bitcoin this year and has tracked the digital currency closely ever since. He has also dived deeper into the alternative currency world by getting his hands dirty by mining litecoin personally.
The company will hold on to any bitcoin it obtains from customers in order to keep the bitcoin price constant and because Zhou and his co-founder Lee Lin believe in bitcoin’s long-term potential as a payment platform and store of value.
According to Zhou, RentHop is one of the top five property discovery sites in New York. The firm also takes listings in Boston and Chicago, and has plans to expand to Miami by the end of the month. The company was formed in 2009 after going through the well-known startup incubator programme YCombinator.
Paying for property in bitcoin has been popular this year. Former casino magnate Jack Sommer offered his 25,000 square-foot home, replete with a Jacuzzi for its staff, for $7.85m worth of bitcoin in October. A Chicago startup calledRentalutions started offering tenants who use its platform the option of paying their rent in bitcoin in August. The same month, a housing company that runs dorms for college students started taking bitcoin for deposits and rent. The firm told CoinDesk that it valued the cryptocurrency because it was free from government manipulation.


Watching Bitcoin, Dogecoin, Etc…

By  | December 28, 2013, 1:24 pm
Underpinning the value of gold is that if all else fails you can use it to make pretty things. Underpinning the value of the dollar is a combination of (a) the fact that you can use them to pay your taxes to the U.S. government, and (b) that the Federal Reserve is a potential dollar sink and has promised to buy them back and extinguish them if their real value starts to sink at (much) more than 2%/year (yes, I know).
Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve’s role as actual dollar source, and its commitment not to allow deflation to happen.
Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?
At the moment, it’s only a $10 billion bubble–or, if you are going to convince me that it is not a bubble, you are going to have to find me a market player willing to become a bitcoin sink…
Timothy B. Lee has smart things to say:
Timothy B. Lee: Dogecoins and Litecoins and Peercoins oh my: What you need to know about Bitcoin alternatives: “Dogecoin is a joke. Though weirdly it’s a joke that, at least on paper, is worth millions of dollars….
The founders of Dogecoin took the source code of another Bitcoin variant called Litecoin, made some further tweaks, and rebranded it as ‘Dogecoin’. That’s a reference to the canine variant of lolcats, an Internet meme where a grammatically challenged dog makes excited statements. Dogecoin has been around for less than a month. In that time, the value of all dogecoins in existence has skyrockted from zero to more than $8 million…. Bitcoin’s pseudonymous creator, Satoshi Nakamoto, did an amazing job of building a payment network that is secure, scalable and useful. But he wasn’t perfect; he made some design decisions that might not look so great in retrospect. The problem is that thanks to Bitcoin’s decentralized design, it’s not easy to change the core Bitcoin protocol. Hence, if you have an idea for an improved version of Bitcoin, it’s easier to start your own virtual currency….
Most of the altcoins have focused on improving mining, the process the Bitcoin network uses to process transactions. In the Bitcoin mining process, hundreds of computers race to solve a repetitive math problem. The winner of the race gets to add a ‘block’ to the Bitcoin network’s global transaction register, and to award itself 25 bitcoins (roughly $20,000) for its trouble…. One problem is that the mathematical formula at the core of the Bitcoin mining process, called a hash function, can be performed much more efficiently by expensive, custom-designed computers than with an ordinary PC. As a result, mining has become an increasingly specialized activity, with people spending thousands of dollars on chips whose only function is to mine Bitcoins…. It’s no longer cost-efficient to mine Bitcoins with an ordinary PC–the electricity consumed is worth more than the bitcoins produced…. A Bitcoin alternative called Litecoin replaces Bitcoin’s hash-based mining process with an alternative that’s harder to accelerate with dedicated hardware…. As this is being written, the value of all Litecoins is more than $500 million….
The second Bitcoin flaw is the… mining process is a computational arms race…. The Bitcoin principle that miners with more computing power earn more Bitcoins is known as ‘proof of work’. Several Bitcoin alternatives use an alternative principle called ‘proof of stake’, where miners with the most virtual cash earn the most. That approach eliminates the incentive to spend ever-larger sums of money on mining hardware, which is good for the environment….
All bitcoins in circulation are worth around $10 billion. Its nearest rival, Litecoin, has a total market value of around $500 million. The other virtual currencies are worth much less…

India follow China by warning against BitCoin , resulting in Exchanges in India closing and a raid on India's largest BitCoin Exchange ! 

Authorities Swoop Down on India’s Biggest Trading Platform

 | Published on December 27, 2013 at 14:45 GMT | AsiaCrimeExchanges


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.

Indian Bitcoin Exchanges Suspend Operations Following RBI Warning

 | Published on December 26, 2013 at 17:00 GMT | AsiaExchangesNews,Regulation

Several 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 consumers and investors to steer clear of bitcoin, citing numerous risks associated with digital currencies. The list of concerns outlined by the RBI was more or less standard – lack of regulation, security issues, rampant speculation and volatility. The RBI also pointed out that Indian bitcoin exchanges are operating without regulatory approval, which is hardly surprising given the fact that India does not have a regulatory framework that would encompass digital currencies.

Services suspended temporarily or indefinitely

Just two days later several bitcoin operators in India chose to play it safe. They suspended trading, either temporarily or indefinitely. Bitcoin trading platform INRBTC said 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 subject to unintentional breaches of anti-money laundering legislation and counter-terrorism laws.
INRBTC said:
“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.”
Another operator,, informed investors that it is suspending buy and sell operations until it 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,” said in a statement posted on its website.
The Hindu reports that many other bitcoin services in India have gone down. Some of their websites appear to be gone, too. However, other operators are carrying on and they are still offering rupee to bitcoin services.


In its statement of 24th December, the RBI said it is examining issues associated with digital currencies, namely trading, holding and use of digital currencies in India. However, the RBI is limited 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 standard foreign exchange regulations. This might force bitcoin exchanges to start operating in much the same way as traditional currency exchanges, but there is a problem. The average bureau de change deals only in national currencies, backed by central banks, using spot prices derived from large interbank transactions. It would be extremely difficult to apply regulations crafted for traditional currency exchanges to digital currencies like bitcoin and it might even be impossible altogether.
The RBI is examining India’s payment system laws, too. It is obvious that it will face similar challenges if it tries to apply existing 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 industry is not what we would call flexible when it comes to international standards.

What next?

At this point it is hard to say whether Indian exchanges that have decided to suspend trading will find a way of getting back into the game. Furthermore it is unclear whether the exchanges that are still working will stay open. Although the RBI said it is looking into the matter, the fact that India does not have digital currency legislation remains a problem, especially if existing legislation is not practically applicable to digital currencies.
These events will undoubtedly create even more volatility and uncertainty, especially in light of China’s clampdown earlier this month. It remains to be seen 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 few region-specific concerns that it would like to address, namely e-ponzi schemes and multi-level marketing schemes involving bitcoin. Using unregulated digital currencies for such activities might make it extremely difficult to prosecute or even identify the culprits.
If plenty of people fall victim to such schemes, they might have quite a few questions for regulators and lawmakers, provided digital currencies remain unregulated. The potential political fallout of doing nothing might be embarrassing and too much to stomach for many lawmakers.

Reserve Bank of India Issues Virtual Currency Warning

 | Published on December 25, 2013 at 10:15 GMT | AsiaNewsRegulation

On Tuesday the Reserve Bank of India (RBI) issued a statement warning the public against the use of virtual currencies. The bank cautioned users, holders and traders of virtual currencies about the potential financial, operational, legal, customer protection and security-related risks they are exposing themselves to.
The bank pointed out that it has been keeping a close eye on developments in the virtual currency world, including bitcoins, litecoins, bbqcoins, dogecoins and other altcoins.
“The creation, trading or usage of VCs including Bitcoins, 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 on such activities.”

RBI outlines digital currency risks

The RBI outlined several potential risks related to digital currencies, echoing warnings issued by several central banks and national regulators over the last few weeks. The bank specifically identified the following risks:
  • Digital currency stored in wallets is prone to theft and loss via misuse or malicious intent, ranging from loss of password, hacking, malware and compromised access credentials. “Since they are not created by or traded through any authorised central registry or agency, the loss of the e-wallet could result in the permanent loss of the virtual currencies held in them,” the RBI said.
  • Payments and transactions handled in digital currencies take place on a peer-to-peer basis without an authorised central agency to regulate such payments. Therefore there is no established framework for recourse to customer problems / disputes / chargebacks etc.
  • There is no underlying value or backing for digital currencies. As they lackintrinsic value, the bank warns that their value is a “matter of speculation.” The bank adds that huge volatility in value exposes users to potential losses.
  • Exchange platforms are set up in various jurisdictions and in many cases their legal status is unclear. This means users of such platforms are exposed to potential legal as well as financial risks.
The RBI also pointed out that there have been “several media reports” on the usage of digital currencies for illicit and illegal activities in several jurisdictions.
“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,” the bank warned.

Potential implications

The Reserve Bank of India says it is in the process of examining issues associated with digital currencies, including usage, holding and trading of virtual currencies under India’s existing regulatory framework. Applicable legislation includes foreign exchange and payment systems laws and regulations.
There are a few exchanges and trading platforms in India and most of them were launched earlier this year. Although they tend to allow users to purchase bitcoin in rupees, none of them appear to have regulatory approval to do so. However, since India does not have digital currency legislation, it is impossible to get such approval, unless Indian regulators decide to apply existing foreign exchange regulations to bitcoin.
For now though, India does not have bitcoin regulation and it is unclear whether the RBI’s statement will change anything moving forward.