Indian tax inspectors have visited Bitcoin exchanges across the country, taking in New Delhi, Mumbai and Hyderabad, among other cities. The “survey operations” were triggered by the recent increases in the price of bitcoin and fears over money-laundering.

The operations took place under  section 133A of the Income Tax Act to gather,

evidence for establishing the identity of investors and traders, transaction undertaken by them, identity of counter-parties, related bank accounts used, among others.”

Cloning Customer Details

Tax officials used ‘mirror imaging’ devices to clone customer details including addresses, bank accounts and correspondence. Surabhi Ahluwalia of the tax department told Reuters that:

“We are looking at collecting information about (the) modus operandi of bitcoin exchanges, investors, their source of investment and possibility of collecting tax.”

“Black Money”

Recent prices rises in bitcoin have alerted regulators to the possibilities for raising tax revenue and clamping down on money laundering. Of particular interest is any “black money” laundered during the demonetization of November 2017 when all ₹500 and ₹1,000 notes were withdrawn from legal tender.

Government Warnings

Cryptocurrencies are currently in a legal no-man’s-land in India. Though not illegal, authorities have warned the public about the risks of dealing in digital currencies. The Reserve Bank of India (RBI) recently restated their position, saying,

In the wake of (a) significant spurt in the valuation of many VCs (virtual currencies) and rapid growth in initial coin offerings, RBI reiterates the concerns conveyed in the earlier press releases.”

According to Bloomberg the Indian government has set-up a panel under Economic Affairs Secretary Subhash Chandra Garg, bringing together luminaries like the heads of the Indian SEC and RBI to determine what the position of Asia’s third largest economy should be towards cryptocurrencies.

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