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Wednesday, December 25, 2013

RBI red-flags use of Bitcoins

If virtual currencies such as bitcoins and litecoins have caught your fancy, beware. Here’s note of a caution from the Reserve Bank of India.

The central bank has warned users, holders and traders of virtual currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks they are exposing themselves to.

In its advice, the RBI said it has been looking at the developments relating to “Decentralised Digital Currency” or VCs, such as Bitcoins, litecoins, bbqcoins, and dogecoins, their usage or trading in the country and the various media reports on them.

The RBI said it is looking at 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 creation, trading or usage of VCs, including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority, the RBI said and added that such currencies may pose several risks to their users.

Since such currencies are in the digital form and stored in digital/electronic media that are called electronic wallets, they are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack, etc. As these virtual currencies are not created by or traded through any authorised central registry or agency, the loss of the e-wallet could result in permanent loss of the currencies held in them.

The RBI said payments by virtual currencies take place on a peer-to-peer basis without an authorised central agency regulating such exchanges. There is no established framework for recourse to customer problems/disputes, etc.

Source: thehindubusinessline


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