Few days ago, India’s Reserve Bank of India issues a notice about Virtual Currencies such Bitcoins, litecoins, bbqcoins (Yeah, BABY!!!!! BBQ Coins!! :D) dogecoins, etc. The RBI stated that the creation, trading or usage of virtual currencies are not authorised by any central bank or any financial authority in the country.
RBI did acknowledge the existence of virtual currencies via a notice. But like many countries, its stand is still not clear as of now. Still, RBI pointed out that users could be for illegal activities, or worse to finance terrorist activities, just like real money.
The following was added in the notice:
- VCs being in digital form are stored in digital/electronic media that are called electronic wallets. Therefore, they are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack etc. Since they are not created by or traded through any authorised central registry or agency, the loss of the e-wallet could result in the permanent loss of the VCs held in them.
- Payments by VCs, such as Bitcoins, take place on a peer-to-peer basis without an authorised central agency which regulates such payments. As such, there is no established framework for recourse to customer problems / disputes / charge backs etc.
- There is no underlying or backing of any asset for VCs. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value.
- It is reported that VCs, such as Bitcoins, are being traded on exchange platforms set up in various jurisdictions whose legal status is also unclear. Hence, the traders of VCs on such platforms are exposed to legal as well as financial risks. There have been several media reports of the usage of VCs, including Bitcoins, for illicit and illegal activities in several jurisdictions. The absence of information of counterparties in such peer-to-peer anonymous/ pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.
The Reserve Bank has also stated that it is presently examining the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.
You can access the disclaimer notice from RBI over here.