Depending upon what you're trying to do and where you're trying to do it having regulations that don't precisely describe your activities as legal can be as difficult to deal with as regulations that state that it's positively illegal. At least in the latter case you know what you're dealing with, in the former you're left in a grey area. This is what appears to be happening with Bitcoin in India.
A number of Bitcoin operators in India have begun suspending their business following RBI's warning against use of such virtual currencies due to potential money laundering and cyber-security risks.
While RBI is yet to come out with a clear regulatory framework for Bitcoins, which have been gaining currency across the world over the past few months, it has issued an advisory cautioning general public against use of Bitcoins and other virtual currencies - notably, no ban.
Within days of this advisory issued on December 24, a number of entities offering Bitcoin services have suspended their operations, temporarily or indefinitely, while websites of a few others have gone down.
Note that the RBI hasn't said that Bitcoin is illegal. Note also that they've not provided a clear set of instructions as to what is indeed legal and what is not. Rather, there's been a slightly vague warning that Bitcoin could be used in money laundering and even in terrorist financing operations. And of course Bitcoin could be so used, as could rubies, gold, rupees and dollars. The point is that for the other things we might exchange for value there's a reasonably clear cut set of rules that everyone has to operate by (although both HSBC and Standard Chartered have fallen foul of them recently in other countries).
The problem is therefore that no one dealing with Bitcoin really knows what the rules they have to live up to are. And so therefore they're waiting until the rules do become clear: or perhaps just going off and doing something more interesting. For one thing that we might say about the Indian bureaucracy is that it's not exactly swift in reaching decisions on such matters. And it's also true that India lives up to the worst nightmares of those who distrust the bureaucratic method of governance. Not only are there rules about everything it's almost impossible to do things which don't have a settled set of rules stating what may be done and how.
In short, the uncertainty in the legal background is pulling the rug out from under Bitcoin in India.
