India Latest Country to Crackdown On Bitcoin

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India, Asia's third-largest economy, is the latest country to wield its regulatory hammer on bitcoin and other digital currencies. The Reserve Bank of India (RBI), that country's central bank, said Thursday regulated financial institutions there can no longer deal in cryptocurrencies.

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"In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling [virtual currencies]," RBI said in a statement.

Bitcoin, the largest digital currency, has frequently come under regulatory scrutiny in the U.S. Other major economies are also cracking down, including Japan.

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Japan cracking down on bitcoin exchanges is a significant development because the yen is one of the most used currencies for bitcoin transactions. Even the dollar lags behind the yen in bitcoin volume by currency. Bitcoin trading in yen terms makes up more than 57% of the global market.

More On India's Bitcoin Decision

“Bitcoin and other cryptocurrencies are not legal tender in India. Before Thursday's statement, the Indian government had issued warnings about the risk associated with trading,” reports CNBC. “The digital assets also raised flags over consumer protection, market integrity and money laundering, the bank said.”

RBI did, however, say it is open to the use of blockchain technology. Blockchain technology provides a transparent and secure process to transfer and digitally record information on a shared transaction database through a secure, decentralized, peer-to-peer distributed ledger, which negates the transactional challenges of counterparty trust and the need for a central repository or ledger. It is designed to facilitate the transfer of information or property between users such that the transfer is guaranteed to be secure and known to all participants and shared across a distributed network where the legitimacy of the transfer cannot be challenged.

Related: Reddit Stops Accepting Bitcoin as Payment

India's “tax department sent notices about cryptocurrency investing to tens of thousands of citizens after a national survey showed more than $3.5 billion worth of transactions have been conducted over a 17-month period,” according to CNBC.

Bitcoin prices traded slightly lower as of this writing, but resided above $6,700. The largest digital currency slumped 50% in the first quarter.

For more information on the cryptocurrency, visit our Bitcoin category.

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