Indian Tax Authority Begins Investigating Bitcoin Exchanges

Ross Houston
December 14, 2017

A Business Today report said the I-T team conducting raids on one of the Bitcoin exchanges, Coinsecure, in Bangalore took control of computers, servers and detained all staff, including the founder and CTO Benson Samuel.

"The income tax officials are gathering evidence to establish the identity of investors and traders, the transactions undertaken by them, the identity of counterparties, and the related bank accounts used, among other things", an income tax official told the PTI. "Surveys" were conducted in Delhi, Bengaluru, Hyderabad, Kochi and Gurugram, since early morning Wednesday.

In a first-ever move to understand and unearth the extent of transactions/ investments in Bitcoin - the crypto currency - in India, the Directorate of Income Tax (Investigation), Karnataka & Goa on Wednesday piloted fact-finding searches at the nine exchanges of Bitcoin in the country, including two in Bengaluru.

They said that the sleuths detected a number of high-net worth individuals (HNWIs) and customer IDs in these databases and prima facie about 2-2.5 million such entities have been traced.

A survey action under I-T law pertains to the tax officials making a surprise visit to the business premises of the party under action but not their residential ones. "However, the operations are still on and final findings will emerge later".

A huge amount of black money converted into white, post-demonetisation, by using bitcoins is also under the scanner of the department.

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.

"Even though virtual currencies do not have legal status in India, cryptocurrency exchanges have been adding over 3,500 users a day and now have reached 8 lakh downloads, said a source privy to the matter".

With the recent spike in the bitcoin prices, the country's central bank - the Reserve Bank of India - set the alarm bells ringing a week ago, cautioning "users, holders and traders" of cryptocurrencies over the perceived risks of involvement.

The Finance Ministry had also constituted an Inter-Disciplinary Committee to review virtual currency both in India and globally and suggest measures to monitor these currencies.

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