While there is no government regulation in India yet regarding cryptocurrencies and blockchain, it is instructive to see what the RBI’s historical stance has been regarding these issues, since the Ministry of Finance will no doubt take their cue from the central bank.
In a press release as far back as 2013, the RBI said:
The Reserve Bank of India has today cautioned the users, holders and traders of Virtual currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.
The RBI then went on to list these risks and how they might affect the consumers. First and foremost on its list was the fact that virtual currencies are stored in electronic wallets and therefore are prone to losses arising out of hacking, loss of password, compromised access credentials, and malware attacks. Since the virtual currencies don’t have any authorised central registry or agency keeping track of them, any loss will likely be permanent and unrecoverable.
This lack of an authorised central agency, the RBI went on to say, was the source of many of its concerns. Another one of them being the fact that, without an authority backing transactions, there won’t be any established framework for recourse to customer problems, disputes, and wrongful charges. The press release added that virtual currencies have no real assets backing their value, and so the setting of the value of these currencies was a matter a speculation. This speculation, the RBI said, had resulted in significant price volatility in the past and so users are exposed to potential losses due to this volatility.
The central bank also expressed its concern about the fact that the cryptocurrency exchanges on which trades were taking place occupied a grey space legally, and so these platforms also exposed users to legal as well as financial risks.
The RBI said it had taken note of several reports of virtual currencies,…