Indian minister of state for finance, Arjun Ram Meghwal has told the upper house recently that the government does not authorize the use of virtual currencies.

In a written statement the minister said, “The absence of counter parties in the usage of virtual currencies, including Bitcoins, for illicit and illegal activities in anonymous/pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism laws.

“Reserve Bank of India (RBI) has already issued a statement in this regard and said that any user, holder, investor, and trader dealing with virtual currencies would be doing so at his/her own risk.The creation of virtual currencies like Bitcoins as a medium of payments is not authorized by any central bank or monetary authority, the minister adds. “No regulatory approval, registration or authorization is stated to have been obtained by the entities concerned for carrying on such activities,” Meghwal underlined.

Recently speaking at the FinTech Conference 2017 organized by Federation of Indian Chambers of Commerce & Industry (FICCI) and The National Association of Software and Services Companies (Nasscom), RBI Deputy Governor R Gandhi cautioned against virtual currencies such as Bitcoin, stating that they pose potential financial, legal, customer protection and security-related risks.

Gandhi said that virtual currencies killing cash is overstated and blockchain, the Foundation for Bitcoins like innovations can never take place of real cash. VCs pose potential financial, operational, legal, customer protection and security related risks, too. Gandhi also said virtual currencies being in digital form are stored in digital/ electronic media and they are prone to losses arising out of hacking, loss of password, compromise of access credentials and malware attack. Payments by such currencies are on a peer-to-peer basis. No established framework for recourse to customer problems, disputes/ charge backs, etc. is feasible.

On February 1, 2017, RBI in a statement said, “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, vide its press release dated December 24, 2013.

“RBI advises that it has not given any license/authorization to any entity/company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk.

Jagdish Kumar