The Reserve Bank of India has warned the public against the use of virtual currencies such as Bitcoin, pointing out that users expose themselves to potential financial, legal and security related risks. The public advisory comes after the borderless digital currency has begun to gain widespread acceptance in India. RBI also said that it had been ‘examining the issues associated with the usage of virtual currencies’ under the legal and regulatory framework of the country. In its list of potential risks, the apex bank highlights problems such as losses arising out of hacking, no sources of customer recourse and the general financial volatility surrounding Bitcoins. The regulator said in a statement: “The creation, trading or usage of virtual currencies including Bitcoins are not authorised by any central bank or monetary authority. As such, there is no established framework for recourse to customer problems.”
A number of India-based trading platforms and exchanges have sprung up over the last six months, catering to Indian users by allowing them to purchase Bitcoin in rupees. The RBI, however, has pointed out that no regulatory approval has been obtained by any entities that carry out such activities. It advised that virtual currencies were not authorized by any central bank or monetary authority, thus posing serious risks to their users.
The RBI advisory had its impact. The country’s largest Bitcoin exchange service has suspended its operations immediately after the advisory was issued.