Bitcoin's story in India has been punctuated by cautions from the apex bank and finance ministry. They have become more frequent now when prices have touched meteoric heights
The recent surge in exchange rates of cryptocurrencies including bitcoin has at one hand drawn interests of the investors, whereas, on the other, has alerted the regulatory authorities to sound cautions against it, repeatedly.
In at least three instances, the Reserve Bank of India has warned the investors regarding the "potential economic, financial, operational, legal, customer protection and security related risks” associated with the trade of cryptocurrencies.
The first such announcement had come in December 2013 when in a detailed press release the RBI had said that the legal status of cryptocurrencies as well as exchanges was “unclear”. The RBI had warned that virtual currencies (VC) are risky as “they are stored in digital/electronic media that are called electronic wallets” and investors are “prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack etc.”
The central bank had clearly stated that “creation, trading or usage of VCs including bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities.”
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At that point of time, bitcoin had seen the first major surge in its prices. The price on December 4, 2013, had climbed to USD 1,151 from a low of USD 102 on October 2, same year.
The second warning sound was blazed in February this year when the bitcoin had started its never-seen-before climb (which is yet to stop). The monetary regulatory authority reiterated that “it has not given any licence/authorisation to any entity/company to operate such schemes or deal with bitcoin or any virtual currency.”
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“As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk,” the Reserve Bank clarified.
The third cautionary advice came more recently on December 5 when "in the wake of [the] significant spurt in the valuation of many VCs and rapid growth in Initial Coin Offerings (ICOs),” the apex bank reiterated the concerns conveyed in the earlier press releases.
Finance minister Arun Jaitley said last week that India does not recognise cryptocurrency as legal tender 'as of now'.
"Recommendations are being worked at. The government's position is clear, we don't recognise this as legal currency as of now," Jaitley said when asked whether the government has taken any decision on cryptocurrency.
Jaitley though confirmed that the Department of Economic Affairs (DEA) had constituted a committee with representations from DEA, Department of Financial Services (DFS), Ministry of Home Affairs (MHA), RBI, Niti Aayog and SBI, and it has submitted its report. The report is being examined, he said.Earlier in August, during the monsoon session of parliament, the finance minister had informed that there are no regulations governing virtual currencies, including bitcoins, in India and the RBI has not given any licence to any entity/company to operate such currencies.