A bitcoin trader was arrested in India and charged with money laundering last Sunday. A group of undercover journalists from India’s Today reported that they lifted the shades off a small “internet broker” that offered exchange of India’s demonetized banknotes, the 500 and 1000 rupees, to bitcoin.
According to the Indian police, a man named, Vijay, used a small shop in a mall in Delhi to offer exchange services of demonetized banknotes to bitcoin. Vijay used Zebpay, an Indian bitcoin exchange, to buy the coins he used in his business. However, he added a 20% exchange fee to the price listed on Zebpay, so he made 2 bitcoins for every 10 bitcoins he sold to his customers.
Vijay confessed that most of his customers were black market merchants who were seeking bitcoin as a safe haven from India’s unstable economy. He also stated his daily volume of exchanges skyrocketed after the demonetization of the 500 and 1000 rupees’ bills on the 8th of November.
The Reserve Bank of India and Bitcoin:
In 2013, the Reserve Bank of India RBI issued a statement that claimed that bitcoin and other cryptocurrencies can be used in money laundering and funding terrorism. Although the RBI didn’t ban the use of bitcoin, its statement warned Indian traders from financial risks that can be linked to cryptocurrency trading.
Bitcoin was Indians’ Safe Haven After The Demonetization of the 500 and 1000 Rupees’ Banknotes:
On the 8th of November, 2016, the Indian government announced demonetization of 2 banknotes from the Mahatma Ghandi Series, the 500 and 1000 rupees’ notes. The announcement was made by Narendra Modi, the Indian Prime Minister, in the evening of the 8th of November stating that the demonetized banknotes will be invalid starting from the 9th of November. The Prime Minister said that the demonetization was an attempt to stop counterfeiting of Indian banknotes, in addition to cracking down on black markets and terrorism funding. He also claimed that this move was aimed at countering corruption, drug trafficking and smuggling.
The days following the government’s demonetization decision, were followed by considerable economic chaos. ATMs and retail banks all across India experienced severe shortages of cash and the consequences were detrimental affecting small businesses as well as large Indian corporations. People had to stand in very long queues to exchange the demonetized banknotes to the newly issued banknotes. The effects of this move on the Indian economy were more pronounced as the NIFTY 50 and SENSEX stock indices took a steep nosedive on the following couple of days.
A large number of Indians tried to shield themselves against the meltdown of the Indian’s economy during the past couple of months by buying bitcoin. Zebpay, India’s top bitcoin exchange, exhibited a surge of volume of bitcoin trading during the past 6 weeks. The extreme rise in demand for bitcoin in the Indian market led to a rise of around 5-10% in its price as compared to prices outside India. To better illustrate this, if bitcoin price is $780, you will mostly pay $858 to purchase it inside India now.
Was Vijay arrested for trading bitcoin? or was he arrested for exchanging the demonetized banknotes to bitcoin? Whatever the answer is, it is illogical to arrest someone for exchanging money, whether it is Fiat money, cryptocurrency or any other form of money. It is really ridiculous to vilify people who trade bitcoin to alleviate the consequences of a failing economy. Is the fault of the Indian citizens that the value of the Indian rupee is declining because of a seemingly unwise economic decision? If you agree that the answer is clearly “no”, then why mark them as “outlaws” if they use bitcoin to alleviate the effects of the Indian economic meltdown?
An Indian man, named Vijay, was arrested last Sunday for exchanging the demonetized 500 and 1000 rupees’ banknotes to bitcoin. Following the demonetization decision taken by the Indian government last November, the value of the Indian currency has been declining steadily and a large number of Indians have been seeking bitcoin as a safe haven since then, so should Indians be arrested for just trying to shield themselves against the economic meltdown?