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My friend has a situation that he'd like assistance with -- we've looked online for help, but we cannot find clarity.


First let me 'set the scene'. Then I'll phrase the question concisely at the end.

He bought some Bitcoin in GBP (funded from a UK bank account). He ended up transferring it to an Indian based exchange (Koinex), then selling it for INR and withdrawing it to his Indian bank account. He would like to get some more Bitcoin, but it is cheaper to buy in GBP than INR.* His intent is to buy and sell quite a lot of bitcoin, potentially buying in GBP, then selling in INR and converting back to GBP.

*By this I mean, if 2 INR = 1 GBP, then you can buy, eg, 1 BTC for 1000 GBP on a European exchange or 1 BTC for 3000 INR on Koinex. So better to convert 2000 INR to GBP, get 1000 GBP then 1 BTC and have 1000 INR left over. (Values here are not intended to be correct!)


Now for the concise question.

There are various money laundering (and related) laws in India, in particular regarding sending INR out of India (which he would be doing). Is the above scenario breaking any of these?

I have found this article, and other similar articles, but I can't get any precise clarification regarding cryptocurrencies. They don't appear to be considered currency in India, but more like gold.

Any advice would be most appreciated, thanks! :)

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    What's the actual question. I understand what you are doing, but I don't see what you are asking. Is it hard to convert INR to GBP? To transfer bitcoin from a GBP exchange to Koinex? What's the actual problem? – Brythan Jan 9 '18 at 18:49
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    Your friend appears to have spotted an arbitrage opportunity in foreign+crypto currency exchange, which is far more interesting than the question of how he wire transfers the rupees back to his UK bank account. – Rupert Morrish Jan 9 '18 at 19:29
  • What is the question? It is not clear what the issue is. – Chris W. Rea Jan 9 '18 at 19:43
  • Yes, you are right, I didn't manage to actually write the question in! I have done so now: the main point is that there are laws in India regarding sending INR out of India, and what such money can be used for. I have edited the question; apologies for the poor writing prior – Sam T Jan 10 '18 at 9:41
  • @RupertMorrish Indeed, it does appear to be an arbitrage opportunity. This would mean that ideally he would be able to repeat the above process (GBP --> BTC --> INR --> GBP). However, I believe there are limits on converting INR, but we are not sure. Advice would be most appreciated! :) – Sam T Jan 10 '18 at 9:42
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Read FMEA. There are restrictions on converting INR into GBP. Liberalized remittance scheme allows transfer for routine needs, tourism, education, medical treatment, investments, etc.

However what is being done may not be allowed. You would need to consult a professional CA to guide you. There are guidelines that Income Tax is planning to issue sometime Q2 this year to indicate taxation aspect of it.

  • Thank you for your answer. It's all quite confusing to me! Is it the case that for any transfer out of India the "Form A2" on your second link needs to be filled in? – Sam T Jan 11 '18 at 14:16

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