Reserve Bank of India (RBI) on Tuesday reiterated its warnings on the bitcoins, just days after the cryptocurrency hit a record high at around $11,800. Though it is not known what prompted the central bank to issue a warning, it comes close on the heels of the Luxembourg-based Bitstamp Exchange, which trades 24×7, said the cryptocurrency trade climbed to $11,799,99. This is the third warning from the central bank on the virtual currency, a segment it does not regulate.
RBI had previously said those trading in virtual currencies were doing so at their own risk, given that the central bank has not given a licence or authorisation for any company to deal in such crypto currencies.
Compared to the global play in bitcoins, India’s exposure is minuscule, but it is growing and capturing interest.
Compared with the global bitcoin capitalisation of $27 billion, Indian bitcoin landscape is at a very nascent stage. As per industry experts, the turnover of bitcoins in India stood at Rs 300 crore and is expected to grow exponentially in the next few years. In addition, the user base is set to explode by 200-300%. This is a clear reflection of bitcoin as an emerging asset class.
Way back in December 2013, RBI had issued its first warning that it has not given any licence or authorisation to any entity to operate such schemes or deal with bitcoin or any virtual currency, adding that any user holder investor or trader would be doing so at their own risk as RBI does not regulate such schemes.
RBI has mentioned that it has been looking at the developments relating to certain electronic records claimed to be ‘Decentralised Digital Currency’ or ‘Virtual Currency’ such as bitcoins, litecoins, bbqcoins and dogecoins, among others, their usage or trading in the country .
RBI had cautioned that the virtual currencies are in digital form and stored in electronic wallets that can be hacked or can be lost due to a malware attack. The payments in virtual currencies take place peer-to-peer without any authorised central agency. The currency is not backed by any asset resulting in their value being one of speculation. Huge volatility in the value of the virtual currency has also been noticed.
The creation, trading or usage of VCs including bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities.
RBI has also stated that it is currently 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.
- As per industry experts, the turnover of bitcoins in India stood at Rs 300 crore
- It is expected to grow exponentially in next few years
- In addition, the user base is set to explode by 200-300%