Indian Tax Authority Begins Investigating Bitcoin Exchanges

Indian authorities are very suspicious of Bitcoin, which is very popular in the country.

The Income Tax Department of India has begun conducting surveys of cryptocurrency exchanges in major cities across the country, according to a report by Bloomberg.

The agency did not reveal if the investigation is related to tax evasion or money laundering.

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Suspicion and enthusiasm

Cryptocurrency in the state of India exists in something of a state of limbo – the authorities are as suspicious of it as the people are enthusiastic.

As things stand, no license or authorisation has been granted to any cryptocurrency-related outfit, because the government does not recognise it as legal currency.

However, it has not been explicitly banned, and it is flourishing in the country. Sandeep Goenka, co-founder of bitcoin exchange Zebpay, said to Quartz in November: “[Zebpay] has been adding between 300,000 and 400,000 users every month on its exchange, compared to about 150,000 users in June and July. This time it almost feels like mainstream adoption, something I have never experienced before, because now we are seeing interest coming in from even the conservative investors.”

At the same time, the government has been slowly processing the new reality and considering what to do. In November, a committee that it set up to discuss the issue advised that cryptocurrency exchanges be shut down, citing money laundering and tax evasion, although it didn’t come up with any proposals as to how this could be accomplished.

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Government starts to move

A few days later, S. Ganesh Kumar, the head of the Reserve Bank of India, confirmed that the state has no intention of recognising Bitcoin as legitimate currency. He said: “Our current position on bitcoins is that we will not be using it for any payments and settlements…though the technology underlying cryptocurrencies will not end.”

The Indian Supreme Court then petitioned the government to find a way to regulate the flow of Bitcoin and ensure accountability, in response to a public interest litigation filed by lawyer Dwaipayan Bhowmik.

The RBI issued a statement last week warning the public that digital currency operates outside of the law and its protections, and should be treated with caution.

Press Trust of India reported that the survey is intended to gather evidence “to establish the identity of investors and traders, their transactions and related bank accounts”, according to Bloomberg.

The CEO of Coinome, an Indian exchange, said at the time of the central bank warning: “If India had to ban virtual currencies then they would have done that by now.”

The news today may be a sign of coming acceptance or an impending ban – it is too soon to say.

 

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