French police said on Monday they had smashed an illegal Bitcoin trading network, seizing virtual currency worth €200,000 ($272,000) in the first such operation in Europe.
Two people have been charged and are in custody following raids last week in the French southern cities of Nice, Cannes and Toulouse and in Brussels that led to the seizure of 388 bitcoin.
"This is the first time that an illegal exchange platform for Bitcoin like this one has been dismantled in Europe," a police statement said.
The two men charged are a 27-year-old Tunisian who ran the website trading in Bitcoin and his suspected accomplice, a 36-year-old Frenchman.
Virtual currencies, most famously Bitcoin, have come under increasing scrutiny by financial regulators as their popularity has grown.
Launched in 2009 by a mysterious computer guru, Bitcoin is a form of cryptography-based e-money that offers a largely anonymous payment system.
Backers say virtual currencies allow for an efficient and anonymous way to store and transfer funds online.
But regulators argue the lack of legal framework governing the currency, the opaque way it is traded and its volatility make it dangerous.
In France, platforms that exchange Bitcoin and euros have to be approved by the ACPR, the bank and insurance supervisory body.
Police found that the website run by the two suspects had not been authorised by the ACPR, and charged them with undeclared work and illegally acting as a banker.
The Tunisian suspect was also charged with money laundering.
French banking authorities have expressed the need for caution around the use of the virtual money noting that it is not only highly volatile but also unregulated by authorities.
The Bank of France is sceptical about the currency, and in December last year underlined that the "highly speculative" currency poses a "certain financial risk" to users.
"Even if the high volatility of the bitcoin is of possible interest for individual or professional speculators, they should be aware of the risks they are taking," the bank said.
Bitcoin recently made headlines when the US Federal Bureau of Investigation closed the Silk Road website where illegal drugs, forged documents, hacker tools and even the services of hit men were hawked with payments made using the virtual currency.
The FBI seized 26,000 bitcoin worth $3.6 million at the time.