Wednesday, December 25, 2013

RBI’s Stance on Bitcoins and Other Virtual Currencies

Earlier this month, we had highlighted some legal issues pertaining to Bitcoin, as that form of virtual currency has been gaining ascendancy the world over. We had stated that the Reserve Bank of India (RBI), as the currency regulator, would certainly be seized of the issue. It now emerges that it is indeed the case.

Yesterday, the RBI issued a press release warning users, holders and traders of virtual currencies (VCs), including bitcoins, of the various risks they may be exposed to. After noting that bitcoins and other VCs are not authorised by any central bank or monetary authority, the RBI also states 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.” The RBI highlights some of the specific risks and concerns with the use of VC, for which interested or affected readers are advised to refer to the specific terms of the press release.

The present effort is merely an interim one to serve as a caution to the public. It is possible that a more detailed pronouncement regarding the legality and acceptability of VCs under the banking, payment and foreign exchange laws can be expected in due course. One cannot envisage anything but for the RBI to tread cautiously in this field, which is beset with imponderables that leading financial regulators around the world are grappling with.

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