India probes unregulated bitcoin exchanges after valuations jump

IT department conducts surveys at bitcoin exchanges

"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.

Bitcoin's explosive growth in the past couple of days has grabbed the attention of Indian Income Tax Department, which carried out "surveys" at nine major bitcoin exchanges across the country on Wednesday in a major crackdown.

The operations were led across six major cities - Bengaluru, New Delhi, Hyderabad, Kochi, Kolkata, and Gurugram - by the Bengaluru wing, under the Karnataka and Goa directorate of the department.

The survey was conducted under the Section 133A of the Indian Income Tax Act and the department officials familiar with the matter said that the search was conducted to recover information of the cryptocurrency investors, their emails, registered and linked bank accounts, and other similar data.

Ahluwalia told Reuters "We are looking at collecting information about modus-operandi of bitcoin exchanges, investors, their source of investment and possibility of collecting tax".

They have reportedly used software tools to capture exchange data, including "cloning and mirror imaging" and identified the accounts of a number of high-net-worth individuals.

The tax official declined to comment on the central bank's concerns, saying the tax department was looking only into the tax implications. The bank has warned people of investing in these currencies.

The RBI had previously said those trading in virtual currencies were doing so at their own risk, given that the central bank had not given a licence or authorisation for any company to deal in such cryptocurrencies.

The regulators said they were also investigating cases from previous year when large amounts of "black money" had been laundered using bitcoin during the demonetization process in the country. This caught the eye of the currency regulators in India and unlike the investors, they do not think that this evaluation of Bitcoin is genuine! .

Bitcoin is referred as cryptocurrency and would be the first decentralized digital currency, as the system works without a central bank or single administrator. Finance Minister Arun Jaitley said the government does not recognize bitcoin.



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