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RBI raises another alarm over Crypto Currencies

RBI raises another alarm over Crypto Currencies

The Reserve Bank of India (RBI) has issued a public warning on the use of crypto currencies for the second time this year. India's central banking institution warned adopters (“users, holders and traders”) of virtual currencies (VCs) such as Bitcoin, regarding “potential economic, legal, financial, operational, customer protection and security related risks.” The first caution had come earlier in February this year.

In December 2013, RBI had issued its initial warning against Bitcoin, which said “creation, trade and usage of Bitcoin as a tool of payment is not authorized."

The RBI stands firm on its stance to not authorize or license “any company or entity to operate any VC including Bitcoin.” The latest public notice also includes a caution about initial coin offerings (ICOs), a fundraising idea used by companies to raise capital in crypto currencies such as Bitcoin, Ether and other VCs for their digital tokens.

The central bank of India warns that it repeats the concerns about crypto currencies in the wake of the latest spurt in the valuation of many VCs and increasing trend of ICOs.

The RBI warning has come at a time when Indian investors are rapidly embracing blockchain networks despite having to pay high premiums. The authorities do not officially approve VCs, but has not ruled it illegal either.

Earlier, India’s apex court had sought the central government to frame a mechanism to regulate the flow of Bitcoin. In April, the ‘Virtual Currency Committee’, comprising interdisciplinary working group from multiple governmental ministries, banks, and research, was formed to propose a regulatory framework for crypto currencies in India.

The committee has submitted its report to Indian finance minister Arun Jaitley in August. The Finance Minister has deemed Crypto currency illegal earlier last week, saying “India does not recognise crypto currency as a legal tender”.

The value of a Bitcoin has reached all-time high breaking $12000 on Tuesday. The crypto currency is on the brink of $13000, currently trading at $12965.