The digital currency Bitcoin is on the radar of India's security and intelligence agencies with sex syndicates, arms and drugs traders and even terrorist groups preferring it as a medium of exchange over cold, hard cash.

The Centre has asked authorities to keep a close watch on the maverick payment tool with near anonymity built into its system that makes it ideal for criminals. The cryptocurrency allows illegal operations with the speed of the internet, but with the secrecy of a cash deal. Bitcoin, heralded as a new way to conduct a broad array of financial transactions, costs about `29,000 apiece and the price fluctuates every day. The home ministry has taken up the security issue with the finance ministry and RBI: in a secret communication it said the currency is being used for crimes, including drug trafficking, illegal arms trade and prostitution in India.

According to experts, Bitcoin and the dark web- where sites are hidden from search engines like Google- form a deadly cocktail as it is very tough to trace a user carrying out transactions through specific software.

"Bitcoin was introduced to the public in 2008 but due to its features it is now majorly used in criminal activities," said Pawan Duggal, who advises organisations on cyber laws. "It became more dangerous when users started using it through the darknet, which can only be accessed by specialised software."

While every Bitcoin transaction is public, the parties involved are kept anonymous as addresses can be created without providing any personal information. The virtual currency has also been used before in ransomware - a type of malware that restricts computer access unless a ransom is paid.

"We need a close watch on the use of the Bitcoin currency in financial transactions because Bitcoin as the currency of the underground internet is also being used in drug trafficking, illegal arms trade and prostitution. There is a need to have effective regulations regarding the use of Bitcoin. MHA to take up the matter with ministry of finance and Reserve Bank of India," said a government note sent to various intelligence units that was accessed by Mail Today.

According to a senior Delhi Police officer in the economic offences wing, Bitcoin is fast becoming the preferred choice in illegal transactions.

Bitcoin currency transactions need monitoring as this method of sending money to any part of the world is being used by criminal syndicates, including organised prostitution, involving fat deals," he said. "It has been noticed that people involved in prostitution are sending money from abroad through Bitcoin to various parts of Mumbai, Delhi, etc."

Though in India companies seek PAN card details for such transactions, the process is not foolproof, say experts. One way of bypassing the check is to download a particular software and use it through a hidden network that cannot be traced. Bengaluru Police recently found a trail of Bitcoins used to buy drugs from a dark site. Investigators said three students purchased banned Ecstasy pills from a website, which were delivered by courier. ATMs have also come up in some countries that allow the user to carry out cash transactions in exchange for Bitcoins, which are transferred to the person's virtual wallet.

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