On Tuesday, the Reserve Bank of India sent out a stern warning against trade in Bitcoin and other virtual currencies, stating that the currencies were not approved by the central bank and more ominously that "the traders of VCs on such platforms are exposed to legal as well as financial risks." It was an ambiguous message, seen by many as a restatement of the fundamental risks of virtual currency, but just a few days later, one exchange found out about those legal risks the hard way.

On Thursday, officers from India's federal Enforcement Directorate raided the offices of buysellbit.co.in, a prominent exchange in the Indian city of Ahmedabad. "We have found that through the website 400 persons have recorded 1,000 transactions," one official told DNA India after the raid. "At present, we believe that this is a violation of foreign exchange regulations of the country. If we are able to establish money laundering aspect then he can be arrested."

Following the raid, Buysellbitco.in has suspended trading, offering the following message on its homepage: "Post the RBI [Reserve Bank of India] circular, we are suspending buy and sell operations until we can outline a clearer framework with which to work." In the wake of the raids, other exchanges like Inrbtc have followed suit, suspending trades and posting similar warnings. The move is similar in some respects to statements from China and Norway, in which central banks cautioned against the dangers of the virtual currency -- but this latest move goes further, with bringing police raids and criminal allegations into the mix. But unlike earlier warnings, the Indian raid seems to have done little to dent demand for the currency. As of press time, Bitcoin were trading for an average of $800, significantly higher than its post-China nadir.