RBI cautions public again on bitcoin

On Thursday, the largest U.S. cryptocurrency exchange struggled to keep up with record traffic as the price surged, with an upcoming launch of the first bitcoin futures contract further fueling investor interest. The Central Bank cautioned those trading in Bitcoins and other virtual currencies regarding the risks involved in the same.

Bitcoin's valuation has soared from less than $1,000 at the beginning of the year to over $15,000 now, emerging as a major attraction for investors worldwide.

The first warning bells have come from the RBI.

Earlier in August, during the monsoon session of parliament, the finance minister had informed that there are no regulations governing virtual currencies, including bitcoins, in India and the RBI has not given any licence to any entity/company to operate such currencies.

Mumbai: The RBI on Wednesday said that the recapitalisation plan announced by the government to shore up the balance sheet of public sector banks (PSBs) would be accompanied by governance reforms including the sale of non-core assets.

In December 2013, RBI said the legal status of cryptocurrencies as well as exchanges was "unclear". Not only this, it went on to explain as to why the RBI feels that the investors could lose their money in cryptocurrency. It is the first decentralised digital currency. They also argue it is preferable to traditional currencies because it is not subject to central bank manipulation.

Indian authorities launched the so-called "Virtual Currency Committee" in April to research and propose a regulatory framework for cryptocurrencies in the country. As such, there is no established framework for recourse to customer problems/disputes/charge backs. Thus, the users are exposed to potential losses on account of such volatility in value. But, because excessive regulation and an outright ban on cryptocurrency trading would send bitcoin trading to unregulated over-the-counter (OTC) markets, the government has been hesitant towards providing unnecessarily strict regulations on cryptocurrency exchange and the bitcoin market. Hence, the traders of virtual currency on such platforms are exposed to legal as well as financial risks.

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