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Bitcoin and India: A historic high and a series of warnings from RBI and the government

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

December 08, 2017 / 06:37 PM IST
LocalBitcoins | This peer-to-peer exchange allows people from different countries to exchange their local currencies to bitcoins. Users post advertisements on the exchange stating their exchange rate and preferred payment method for buying or selling bitcoins. By replying to these advertisements, a trade is opened and escrow protection is automatically activated. Escrow protects both buyer and seller, by keeping the bitcoins safe until the payment is done and the seller releases bitcoins to the buyer. Bitcoins are placed in LocalBitcoins web wallet from where one can pay for their bitcoin purchases directly. However, investors need to be aware of scams as they are dealing directly with other people unlike other stock-like exchanges or centralized bitcoin trading sites.

LocalBitcoins | This peer-to-peer exchange allows people from different countries to exchange their local currencies to bitcoins. Users post advertisements on the exchange stating their exchange rate and preferred payment method for buying or selling bitcoins. By replying to these advertisements, a trade is opened and escrow protection is automatically activated. Escrow protects both buyer and seller, by keeping the bitcoins safe until the payment is done and the seller releases bitcoins to the buyer. Bitcoins are placed in LocalBitcoins web wallet from where one can pay for their bitcoin purchases directly. However, investors need to be aware of scams as they are dealing directly with other people unlike other stock-like exchanges or centralized bitcoin trading sites.

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.

In Pics: Bubble or not! Facts you might not know about bitcoin rally

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.”