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Indians lose millions in bitcoin meltdown

1205-bitcoin-china-630x420In a rude jolt to growing virtual currency frenzy in India, bitcoins worth hundreds of millions of rupees held by some Indians have vanished with collapse of Japan-based Mt Gox, which was the world’s largest bitcoin exchange so far.

Having filed for bankruptcy, Mt Gox has admitted to have lost 7.5 million bitcoins of its customers and 100,000 of its own, which together are estimated to be worth about $0.5 billion (over Rs 30 billion).

The exchange was predominantly used by foreigners, including those operating on behalf of clients from India, while some Indians were directly trading there. In its bankruptcy filing, Mt Gox has listed 1.2 million creditors, bulk of which are foreigners and just about 1,000 from Japan.

The debacle can also intensify calls for stricter regulatory checks on bitcoins and other virtual currencies in India and other countries.

Most of the affected Indians refused to identify themselves, fearing probing questions from tax and other authorities in India as they had mostly used untaxed money for purchase of those bitcoins and were looking for easy returns in this so-far unregulated market.

However, many bitcoin operators and traders confirmed that majority of bitcoins held by Indians were being traded on Mt Gox and the value of those lost there could be at least Rs 100-200  million.

There are over 35,000 bitcoins (worth over Rs 1 billion) held by Indians across the country, while many NRIs are also dealing in this popular virtual currency, which currently trades at $ 550 apiece but isn’t backed by any financial authority or real asset.

India, which is home to 200 million Internet users, has of late seen a tremendous rise in bitcoin enthusiasts lured by return potential, anonymous nature of transactions and pure novelty, among others.

Today, it costs about Rs 37,000 including charges and fees to buy just one bitcoin from Indian operators, many of whom have been doing business cautiously after the Reserve Bank last year issued an advisory warned the public about the potential risks associated with such currencies.-The Financial Express