With a public statement, India’s central bank, the Reserve Bank of India (RBI), has - once again - said it has not authorized any use of virtual currencies like bitcoin among companies or individuals in the country.
In a public release on its website, the RBI has stated:
The Reserve Bank of India advises that it has not given any licence / 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.
India’s financial regulator also pointed to a previous public statement from December 2013, when it cautioned adopters and traders of virtual currencies “including Bitcoins” about any potential legal, operational and consumer protection risks.
At the time, the RBI urged caution among bitcoin and virtual currency (VC) users, reminding them of the possibility of digital wallet compromises due to hacking, malware-led attacks etc. The “huge volatility in the value of VCs” was also cited one of the factors toward the public warning. The central authority had also stated that it was “presently examining” the use of virtual currencies under existing legal and regulatory frameworks at the time. Besides today’s reiterated warning, the RBI hasn’t followed up on those initial examinations.
Speaking to CCN, Sathvik Vishwanath, CEO of leading Indian bitcoin exchange UnoCoin is quick to point out that the RBI’s latest statement is merely reiterating the previous 2013 statement.
The RBI is reminding users of its original statement from years ago. Nothing has changed since the original statement, for the better or worse.
“No, they haven’t” added Vishwanath, when asked if the RBI had reached out to UnoCoin toward exploring or laying the groundwork for regulating bitcoin exchanges in the country.
India’s bitcoin trading volumes are relatively small compared to other countries around the world. So, it may not be a priority, yet. First, the RBI will need to understand the bitcoin ecosystem before regulating it.
When asked if India’s bitcoin industry would welcome regulation from the financial regulator, Vishwanath stated:
It depends. The RBI will look at examples of regulatory moves from around the world and it could go one of two ways. New York’s BitLicense was a regulatory move that did not help the industry and a lot of companies left its shores. [Regulatory moves in Japan and South Korea] where Fintech innovation is encouraged, would be welcome.
The RBI’s latest statement on bitcoin and virtual currencies comes amid soaring interest in the cryptocurrency in the country. Bitcoin adoption in India has never been higher and the increased interest follows the unprecedented and controversial demonetization drive enforced by India’s central government.
While the regulator’s official stance is one to urge caution among users and adopters, RBI’s governor and chief Raghuram Rajan has previously stated “bitcoin is fascinating”, in late 2014.
Curiously, a recent blockchain whitepaper [PDF] released by the RBI’s research references bitcoin repeatedly, noting that blockchain technology was best known for “its groundbreaking application in the modern cryptocurrency Bitcoin, and moreso because of the disruptive innovations it promises.” Having researched blockchain technology solutions for core banking processes, researchers deemed blockchain technology had “matured enough” to be the core technology toward digitizing the Indian rupee.
Interview with Sathvik Vishwanath edited for clarity.
Images from Wikimedia and Shutterstock.