Modi govt warns against use of Bitcoins, says can attract anti-money laundering law

The government on Tuesday said use of virtual currencies like Bitcoins is not authorised by RBI and could result in breach of anti-money laundering provisions.

The RBI has already cautioned users, holders and traders of virtual currency, including Bitcoin, about the potential financial, legal and security risks arising from the usage.

"The absence of counter parties in 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," Minister of State for Finance, Arjun Ram Meghwal, said in a written reply in the Rajya Sabha.

He further said that the creation of virtual currencies like Bitcoins as a medium of payments is not authorised by any central bank or monetary authority.

"No regulatory approval, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities," Meghwal said.

The RBI had earlier warned that any user, holder, investor and trader dealing with virtual currencies would be doing so at his/her own risk.

Reacting to this development Saurabh Agrawal, CEO of Zebpay told Moneycontrol: "We appreciate the honourable minister's concern. However, we are sure Indian government is progressive and to ensure right growth will come out with positive regulations on digital currencies and will support the growth of the technology."

Earlier on his blog, Agrawal had said that the government should explore the technology and should not declare it as illegal.

"Just for the same reasons that the Internet, the smartphone or a taxi hailing app should not be declared illegal when used for illegal activity. Because it makes far more economic sense to go after bad actors (ponzi schemes) rather than shutting down the entire technology," he had said.

(With inputs from PTI)