RBI doesn’t have information on illegal trading, dealing in virtual currencies, reveals RTI reply
Shashank Manilawala 26 October 2017
While maintaining that it has not issued any licence or authorisation to any company to trade in virtual currencies like Bitcoin, the Reserve Bank of India (RBI) has no information about entities dealing in illegal trading, investing and exchange of virtual currencies, reveals a reply received under Right to Information (RTI) Act. 
 
We filed an RTI application with RBI seeking information about trading, investing, exchange and online wallet services in virtual currencies that are being offered by several entities in India. Since Reserve Bank has not yet allowed dealing with virtual currencies in the country, we wanted to know if they had taken any action against those indulged in this business.
 
When asked about providing information on any action taken and punishment on those entities dealing in illegal trading, investing, exchange and online wallet service of virtual currency, the central bank said, "Reserve Bank of India has no information in this regards".
 
Responding to a question on issuance of a notification or instructions about virtual currencies, RBI said, “As such, any user, holder, investor or trader dealing with virtual currencies will be doing so at their own risk”. 
 
 
There have been several reports of usage of these currencies for illicit and illegal activities in several jurisdictions, which could subject the users to unintentional breaches of anti-money laundering laws and laws combating the financing of terrorism, it added.
 
Earlier in February, the central bank had issued an advisory warning people about not dealing in virtual currencies. “Reserve Bank is presently examining the issues associated with the usage, holding and trading of virtual currencies under the extant legal and regulatory framework of the country, including foreign exchange and payment systems laws and regulations,” it had said.
According to the advisory from the RBI, there been several reports of usage of these currencies for illicit and illegal activities in several jurisdictions, which could subject the users to unintentional breaches of anti-money laundering laws and laws combating the financing of terrorism.
 
There is a surge in e-wallets for storing virtual currency, like Zebpay, which is operated by Zeb IT Service Pvt Ltd. A large number of people are using the services of such e-wallets to trade, invest and exchange in virtual currency. These currencies are traded through exchanges peer to peer which are situated in different jurisdiction and hence their legal status is not yet clear. Moreover the whole idea of virtual currency is that it is digital and therefore also prone to cyber-attacks. This increases the risk of those using such currencies as a medium of exchange or just trading or investing in it.
 
Virtual currencies being in digital form are stored in electronic media that are called e-wallets. Therefore, they are prone to losses arising out of hacking, loss of password, compromise of access credentials and malware attack. 
 
Since they are not created by or traded through any authorised central registry or agency, the loss of the e-wallet could result in permanent loss of the currency held in those. 
Payments by these currencies take place on a peer-to-peer basis without an authorised central agency which regulates such payments. As such, there is no established framework for recourse to customer disputes. 
 
There is also no backing of any asset for virtual currencies. 
 
"As such, their value seems to be a matter of speculation. Huge volatility in their value has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value," the RBI had said. 
 
Bitcoins are being traded on exchange platforms set up in various jurisdictions whose legal status is unclear. Hence, its traders are exposed to legal as well as financial risks. 
 
The central bank said that it had been looking at the developments relating to certain electronic records of virtual currencies such as bitcoins, litecoins, bbqcoins and dogecoins, their usage and trading in the country.
 
Comments
Ketan Soni
4 years ago
Just so that it is not legal in india, makes it illegal?
NIPUN DAVE
Replied to Ketan Soni comment 4 years ago
I think the consequence will be that you won't be left with any legal remedy, just in case you have been cheated or defrauded with.
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