Why Does RBI Have Reservations Against Virtual Currencies?

by Paul Joseph on December 27, 2013 · 0 comments

India’s apex financial body, the Reserve Bank of India ( RBI ) has raised it cautionary wand yet again & this time it has concerns over the Virtual Currencies. RBI has rung the bells of caution & asked users, holders and traders of Virtual Currencies, most notable being Bitcoin, about potential financial, operational, legal, customer protection and security related risks that these financial instruments carry with them. The public advisory comes after the borderless digital currency has begun to gain widespread acceptance in India. Why is RBI so wary about Virtual Currencies? The apex bank doesn’t have any qualms about digital commerce. In fact, it welcomes it & on multiple occasions , the body has relaxed a few norms too. However, when it comes to currency in the virtual form, RBI’s alarm bells start ringing. It has happened on quite a few occasions with PayPal , who had to struggle really hard to continue operations in India & has come to the verge of suspending operations too. The same is now happening with Bitcoin . After hearing news about the multiple hassles that RBI has warned about, Bitcoin Operators have begun suspending their business. Apparently RBI is worried about the potential money laundering and cyber security risks. RBI noted that the creation, trading or usage of Virtual Currencies including Bitcoins, as a medium for payment, is not authorized by any central bank or monetary authority. “ No regulatory approval, registration or authorization is stated to have been obtained by the entities concerned for carrying on such activities. As such, they may pose several risks to their users, ” said RBI. Bitcoin is essentially a virtual currency that can be generated through complex computer software systems with solutions that are shared over a network. The process is highly complex and such ‘mining’ can be done only on very powerful servers. Hence there is a lot of uncertainty owing to which value of these virtual monies jumped to US$ 1000, while subsequently crashing to a less than third that value. Interestingly, the operators who have suspended operations say, “ This is being done to protect the interest of our customers and in no way is a reflection of Bitcoin’s true potential or price. ” Hence, unless RBI clears the air about the matter, it is advised to avoid trading in Bitcoins & similar other virtual currencies.   Image Source | bitcoinmagazine Looking For A Social Media Agency?? – Contact WATConsult – India’s Leading Social Media Agency

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