Reserve Bankgebouw of India Issues Virtual Currency Warning
On Tuesday the Reserve Bankgebouw of India (RBI) issued a statement warning the public against the use of virtual currencies. The handelsbank cautioned users, holders and traders of virtual currencies about the potential financial, operational, legal, customer protection and security-related risks they are exposing themselves to.
The bankgebouw pointed out that it has bot keeping a close eye on developments te the virtual currency world, including bitcoins, litecoins, bbqcoins, dogecoins and other altcoins.
“The creation, trading or usage of VCs including Bitcoins, spil a medium for payment are not authorised by any central canap or monetary authority. No regulatory approvals, registration or authorisation is stated to have bot obtained by the entities worried for carrying on such activities.”
RBI outlines digital currency risks
The RBI outlined several potential risks related to digital currencies, echoing warnings issued by several central banks and national regulators overheen the last few weeks. The bankgebouw specifically identified the following risks:
- Digital currency stored ter wallets is prone to theft and loss via misuse or malicious intent, ranging from loss of password, hacking, malware and compromised access credentials. “Since they are not created by or traded through any authorised central registry or agency, the loss of the e-wallet could result ter the voortdurend loss of the virtual currencies held te them,” the RBI said.
- Payments and transactions treated te digital currencies take place on a peer-to-peer ondergrond without an authorised central agency to regulate such payments. Therefore there is no established framework for recourse to customer problems / disputes / chargebacks etc.
- There is no underlying value or backing for digital currencies. Spil they lack intrinsic value, the handelsbank warns that their value is a “matter of speculation.” The canap adds that hefty volatility ter value exposes users to potential losses.
- Exchange platforms are set up te various jurisdictions and te many cases their legal status is unclear. This means users of such platforms are exposed to potential legal spil well spil financial risks.
The RBI also pointed out that there have bot “several media reports” on the usage of digital currencies for illicit and illegal activities ter several jurisdictions.
“The absence of information of counterparties te 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 handelsbank warned.
The Reserve Bankgebouw of India says it is ter the process of examining issues associated with digital currencies, including usage, holding and trading of virtual currencies under India’s existing regulatory framework. Applicable legislation includes foreign exchange and payment systems laws and regulations.
There are a few exchanges and trading platforms ter India and most of them were launched earlier this year. Albeit they tend to permit users to purchase bitcoin ter rupees, none of them show up to have regulatory approval to do so. However, since India does not have digital currency legislation, it is unlikely to get such approval, unless Indian regulators determine to apply existing foreign exchange regulations to bitcoin.
For now tho’, India does not have bitcoin regulation and it is unclear whether the RBI’s statement will switch anything moving forward.
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