Support for bitcoin wanes in India, China
December 27, 2013, 6:32 am

Central Banks in both China and India have warned against using the bitcoin [Getty Images]

The Reserve Bank of India (RBI) is echoing concerns raised by China’s Central Bank earlier this month about bitcoins.

The RBI is yet to come out with a clear regulatory framework for bitcoins but 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 in India offering bitcoin services have suspended their operations, temporarily or indefinitely, while websites of a few others have gone down.

China’s central bank also warned in early December that bitcoin was not legally protected and had no “real meaning”, and barred financial institutions from using the currency.

China’s central bank extended that ban to payment companies later and gave them until Chinese New Year, which begins on 31 January, to comply.

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.

Bitcoin remains legal to use in China, and the central bank is standing by an announcement that individuals are free to trade it at their own risk. But without third party payment providers, new purchases of the currency are virtually impossible.

Hardly three years into existence, bitcoin has already become the world’s most expensive currency and its per unit value soared past USD 1,000 level or about Rs 63,000 recently, although the prices have now slipped largely owing to waning of Chinese support.

The RBI’s warning has further added to the bitcoin’s 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.

Indian officials have raised concerns about this new phenomenon snowballing into an ‘e-ponzi’ or an electronic version of investor fraud, given the growing promotion of bitcoin as investments without any enabling regulations for them.

TBP and Agencies