Cryptocurrency This Week: As India Surveys Bitcoin Exchanges, West Toughens Its Regulations

Once voiced by a cryptocurrency enthusiast, “Bitcoin will do to banks what email did to the postal industry” has now been raised by Israel’s Prime Minister Benjamin Netanyahu while speaking of cryptocurrencies, exchanges and cryptocurrency regulations. “Is the fate of banks that they will eventually disappear? Yes. The answer is Yes. Does it need to happen tomorrow? And do we need to do it through Bitcoin? That’s a question mark!” stated the PM.

This is December 16, 2017. As we are about to bid adieu to 2017, Bitcoin that entered the year at $788, is all set to exit at $20K, with almost 25-fold price surge. Currently trading at $17,788, the ‘virtual’ cryptocurrency has shown its real colours this year (As if, Satoshi had some Orwell in his mind, ‘reality exists in the human mind, and nowhere else’). The Bitcoin derivatives — Bitcoin futures — are real. The raids and Income Tax surveys surrounding Bitcoin are real. The big investment funds being raised and invested by VCs are also real.

On the one hand, The Washington Post, this week, wrote that no matter how up Bitcoin goes, the risk involved around it will always be higher. On the other, the Income Tax (IT) department in India has surveyed around nine leading cryptocurrencies, asking for the details of significant Bitcoin buyers.

Since the ‘infamous’ demonetisation, the government has already frozen over 200K bank accounts for suspected ‘unusual’ transactions, and this may be repeated for Bitcoin traders and exchanges too. For instance, one of the cryptocurrency exchanges BTCXIndia had to shut down its operations on May 8, 2015, after Kotak-Mahindra bank pulled the plug on it. However, the exchange resumed operations on July 5, 2017, after moving to Andhra bank.

In the US, while the Congress appears to be in favour of passing the Bill ‘S.1241 – Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017’ that seeks to define anyone issuing, redeeming, or cashing Bitcoin as a financial institution, the UK regulators have once again warned that Bitcoin investors may ultimately lose all the money.

There is clearly an ‘undeclared’ war between the Bitcoin enthusiasts, cryptocurrency investors traders and the majority of financial authorities across the world. However, with Ripple overtaking Bitcoin Cash, cryptocurrency enthusiasts go the Orwellian way, where “war is peace, freedom is slavery and ignorance is strength”.

Let’s take a look at the recent developments from the world of Cryptocurrency!

India: The Big Brother Is Counting Your Bitcoin

The Income Tax (IT) department recently conducted survey operations at major Bitcoin and other cryptocurrency exchanges across the country, under Section 133A of Income Tax Act 1961. Speaking to Inc42 Shivam Thakral, co-founder of multi-cryptocurrency exchange BuyUCoin stated,  “The Department of Income Tax visited our office asking details of people trading Bitcoin in significant numbers.

Shivam further said, “It is simply a survey operation, and the authorities are trying to trace the PAN/Aadhaar and bank account details of these traders and investors.”

The operation is being linked with the government’s attempt to unmask people investing black/grey money in Bitcoins. The government also suspects that people exposed in the Panama and Paradise papers are now deflecting their investments in Bitcoins. Through the investigation, officials of the Income Tax department are, therefore, trying to establish a link between the Panama and Paradise exposes. Both the expose had revealed 500 and 714 Indians respectively who have allegedly hidden a major portion of their incomes through shell companies in abroad.

.@rajeev_mp had written to #RBI in Dec’16 regarding the risks of surge in domestic #Bitcoin trade and black economy moving to dark internet. He had suggested that #RBI shud develop capabilities to deal with it. @PMOIndia @narendramodi https://t.co/u3olfxBtLe pic.twitter.com/d3ITv64lvP

— Akshay S Rao (@akshaysrao) December 13, 2017

Meanwhile, Rajeev Chandrasekhar, a Rajya Sabha sitting MP and lead investor in some media & entertainment companies including Republic and Asianet News has written to RBI governor General expressing concerns over Bitcoin trading. Terming ‘domestic Bitcoin trade as part of the move of black economy to the dark internet’ Rajeev has demanded the RBI and the Indian government to bridge the policy requirement and surveillance challenges

Multi-Cryptocurrency Exchange Koinex Raises Pre Series A Funding

After Zebpay, Unocoin and Coinsecure, Mumbai-based Koinex, a multi-cryptocurrency exchange and trading platform, has recently closed Pre Series A round of funding led by Dirk van Quaquebeke, Managing Partner of Beenext and Daniel Morehead, founder and CEO of Pantera Capital. This is yet another evidence of VCs’ growing fondness for investments in Indian cryptocurrency-based startups.

The company plans to channel the capital infusion towards scaling its technology infrastructure, further enhancing the product, and expanding the team. The cryptocurrency exchange also plans to launch its mobile application, and consequently add mobile-based users onto its platform over the next few months.

In a previous round, Koinex had also raised an undisclosed amount of Seed funding from Beenext, among other angel investors.

EU’s Clampdown To Combat Terrorism Financing

The European Union is set to impose stricter rules on cryptocurrency exchanges in order to prevent terrorist financing and money laundering. After the EU meeting on Anti-money laundering measures’ agreement, Europe’s Justice Commissioner Vera Jourova stated, “Today’s agreement will bring more transparency to improve the prevention of money laundering and to cut off terrorist financing.”

The new measures will make exchanges share users public keys along with their KYCs with the authorities while limiting the use of cryptocurrency prepaid payment cards. Allowing authorities to access all the Bitcoin data, the agreement is being seen as a breakthrough for EU authorities in preventing money-laundry.

Bitcoin Foundation Strongly Opposes The US Anti-Money Laundering Bill

In the US Congress, a controversial bill S.1241 – Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017 has been introduced that will allegedly affect the free flow of cryptocurrency technology transfer in future.

Bitcoin’s parent organisation, the Bitcoin Foundation has lobbied strongly against the bill and has proposed a number of suggestions in the draft. The foundation alleges that the Act seeks to define anyone issuing, redeeming, or cashing Bitcoin as a financial institution. This would require them to comply with the Bank Secrecy Act, 31 U.S.C. § 5312 and also adopt the same formal reporting procedures as financial institutions for the purpose of reporting suspicious transactions.

The foundation in its feedback states, “The overall record before the Judiciary Committee supports our recommendation that, if virtual currencies were to be involved in §1241, the Bill should focus on the role of corporate professional exchangers of virtual currencies with fiat currency specifically identified by the Treasury Department. The Bitcoin Foundation continues to oppose much of Section 13 of the Bill, and, in the event that these provisions are not deleted from the current Bill, maintains its proposed amendments.”

The foundation has also drafted a petition on change.org, and the suggestions have already been sent by Foundation’s Counsel to Senator Grassley.

South Korea Plugs In Emergency Measures For Cryptocurrency Regulations

Taking emergency measures for cryptocurrency regulations, the South Korean government has increased the standard and penalties applicable when a security breach occurs at exchanges.

As per a report by South Korea publication Hankyung, a government official said, “We will not allow virtual currency transactions unless the requirements for protection of investors, transparency of transactions and other measures are met through prompt legislation in the near future.”

The news publication also reported that the government has decided to ban financial companies from buying, securing, and investing in virtual currency.

Meanwhile, the preparatory committee of the Korea Block Chain Association has announced that the autonomous regulations of the virtual currency exchange is in the progress and over 40 steps will be taken by the 14 domestic cryptocurrency exchanges such as Bitsum, Coin, and Cobit to combat money laundering. The steps include limiting one Bitcoin account per person.

The Bitcoin Fraud

Recently, a fictitious Indian cryptocurrency website trading ‘Kashhcoins’ for fraud worth $7.79 Mn has been busted by the Delhi police crime branch.

A gang of crooks which floated a fictitious cryptocurrency Kashhcoins put up a website and duped several people in Delhi and other parts of the country before the crime branch arrested a key player. The accused, Narendra Dahiya, hails from Sonipat, Haryana. Eight other members of the gang have been identified and raids are being conducted to nab them.

The gang had named the currency Kashhcoins and put them up for sale on the website Kashhcoin.net. They devised a unique combination of cryptocurrency and multi-level marketing to make huge profits. They asked each unsuspecting buyer to add their families, relatives and friends in the chain to earn profits. For every new member added, they were promised incentives over and above their profit.

On the website, the company claimed to provide “all residents of earth” with a sufficient number of coins to achieve independence from other money. It stated, “There is a finite number of KASHH Coins. The maximum amount of KASHH Coin is 2,515,020,000 and, unlike money issued by the government, KASHH Coin can’t be affected by inflation and are impossible to counterfeit.”

In South Korea, the National Intelligence Service has reportedly found evidence that North Korea has been trying to hack South Korean cryptocurrency exchanges. Earlier this year, a number of cases regarding cryptocurrency exchanges hacking had been registered by the National authority.

In a related development, Russian Presidential Candidate Boros Titov is trying to ride on Bitcoin popularity by announcing that he would make Bitcoin a legal affair once made the President. In contrast to this, “Promoters are perpetuating a massive scam of the highest order on everyone”, said the Wolf of the Wall Street Jordan Belfort terming Bitcoin and ICOs as the biggest scams ever.

Meanwhile, Bitcoin and Bitcoin futures appear to help each other gain the momentum. Cboe that launched Bitcoin futures last week recorded a price surge of nearly 8% in its first week.

In other news, Coin Telegraph reported “Bitcoin is no longer a man’s game”, as four out of 30 of the largest initial coin offerings this year through October had female co-founders and two of their ICOs were among the largest so far.

Stay tuned to Inc42, for more latest updates on cryptocurrency!