Innovation Behind Bars: the Arrest of India’s First Bitcoin ‘ATM’ Operators
On what grounds were the creators of India’s first Bitcoin “ATM” arrested this October?
Earlier in October, the developers of India’s first Bitcoin (BTC) “ATM” were arrested in the city of Bangalore under criminal charges, in a case that has shaken the local startup community and cast a spotlight on the lack of clarity surrounding “the law of the land” in regard to crypto.
While the official Freedom of Information Report (FIR), detailing the charges against the men, is not in the public domain, the mainstream media has reported that they were booked under serious criminal charges, including criminal conspiracy, cheating, and forgery.
From the gravity of the alleged charges, you’d be forgiven for assuming the suspects were deceitful fugitives, yet they are two of the co-founders of the country’s first cryptocurrency exchange, Unocoin. Described by Kashif Raza, of the local blockchain advisory duo “Crypto Kanoon,” as being among India’s “brightest” tech pioneers, and an “icon of the crypto industry.”
Their high-profile arrest and remand in police custody for seven days thus carries undeniable symbolic clout, perceived as being tantamount to putting innovation itself behind bars.
Cointelegraph spoke with Kashif Raza to unravel the story, as well as consulting with local cyber expert lawyer, Prashant Mali, whose periodic interjections, “yeh kahan se aa gaya?” (“where did this come from?”), encapsulate the local crypto community sentiment in the wake of the arrests.
Bangalore, which earned the sobriquet of India’s “Silicon Valley” for its buzz of tech startups and venture capital firms, is perhaps unsurprisingly the home turf of the country’s “first entrant into the Bitcoin industry,” Unocoin, founded in the city in 2013.
Four years after its inception, the startup says it now employs 120 full-timers to run its BTC-INR (rupee) trading platform, to process transactions worth over 2 billion INR monthly, for over 1.3 million users.
Recent years were propitious for initiatives like Unocoin, which began to attract significant venture capital investment in fall 2016, just as Indians’ interest in Bitcoin was hitting a fever pitch as the government ushered in its bold — and still highly contentious — demonetization policy.
In a bid to clamp down on tax evasion, in November 2016, the Prime Minister, Narendra Modi, announced the invalidation of 500 and 1,000 rupee bills — which accounted for 86 percent of the currency in circulation at the time. Demand for crypto in the heat of the “cashless chaos” of that year soared, catapulting Bitcoin’s valuation to a 12 percent premium on the Unocoin exchange.
Unocoin president, Sunny Ray, revealed that Bitcoin trading doubled in the midst of a tumultuous, demonetized economic climate that was yet further stoked by that winter’s rumors of impending curbs on domestic gold holdings and possible restrictions on gold imports.
Trading euphoria showed little signs of letting up the following year, with popular Indian exchanges, such as Zebpay, forced to cap Bitcoin purchases in spring 2017 as their supplies failed to keep pace: the Zebpay Bitcoin Wallet India hit over half a million downloads in May, eclipsing many of the country’s stalwart banking incumbents on the Apple app store.
Yet 2017 also presaged an unfolding, increasingly crypto-skeptic agenda on the part of India’s government and monetary authorities. In February, the Reserve Bank of India (RBI) — steward of the country’s notoriously strict capital controls — chose to reiterate its 2013 warning against the dangers of investing or trading in virtual currencies, yet nothing in the statement as of yet went beyond striking an official note of circumspection.
Then, in March, a member of the ruling Bharatiya Janata Party (BJP), Kirit Somaiya, characterized Bitcoin as a risk-ridden “hypothetical currency” before parliament, urging RBI, the Securities and Exchange Board (SEBI), and the Finance Ministry, to step in as a matter of “urgent need” to rescue the populace from yet “another big Ponzi fraud.”
Somayia soon tipped over from alarmism to outright fallacy, when he falsely claimed that crypto was “illegal” in ensuing weeks, dismissing the robust self-regulatory initiatives of the country’s thriving exchanges as “nonsense.” And he