IT Department pays visit to Bitcoin exchanges

Gladys Abbott
December 15, 2017

Bitcoin's meteoric rise and unprecedented growth in the past two months has caused government bodies from across the globe to intervene and India remains no exception.

Thousands of transactions are taking place every day in unregulated cryptocurrency exchanges and the Income Tax Department has launched surveys in the cities of Delhi, Mumbai, Pune, Bengaluru and Hyderabad, spokeswoman Surbhi Ahluwalia said. As reported yesterday, the tax department reportedly visited the premises of 9 bitcoin exchanges to look into "alleged tax invasion".

The official stated that the objective was "gathering evidence to establish the identity of investors and traders, transactions undertaken by them, identity of the counterparties, related bank accounts used, etc".

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". This is because there are no regulations about virtual currencies in India. "However, the operations are still on and final findings will emerge later", a senior official was quoted as saying.

Last week, the Reserve Bank of India (RBI) said it was concerned about bitcoin, just days after the cryptocurrency hit a record high of just under $11,800, stoking fears that a rapidly swelling bubble could burst.

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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.

The crypto currency is of interest to law-enforcement agencies, tax authorities and financial regulators, who are trying to understand how Bitcoin fits into existing frameworks and to identify people, who are involved in virtual trade.

Bitcoin is referred as cryptocurrency and would be the first decentralized digital currency, as the system works without a central bank or single administrator.

The country's finance minister, Arun Jaitley, also recently clarified that the government does not recognize bitcoin as legal tender, adding that financial sector watchdogs and the government are working on "recommendations" to regulate the cryptocurrency.

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