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India’s Central Bank Issues Bitcoin Warning [Rinse, Repeat]

Last Updated March 4, 2021 5:02 PM
Samburaj Das
Last Updated March 4, 2021 5:02 PM

For the second time this year, the Reserve Bank of India (RBI) has issued a public caution on cryptocurrencies and, specifically, bitcoin.

With a public notice  on December 5, India’s central bank has – once again – cautioned adopters (“users, holders and traders”) of cryptocurrencies like bitcoin about “potential economic, financial, operational, legal, customer protection and security related risks” in dealing with VCs (virtual currencies).

The RBI also reiterated its position of not authorizing or licensing “any entity/company to operate such schemes or deal with Bitcoin or any VC”, in a repeat of its warning from February this year. India’s central bank issued its first warning against bitcoin in December 2013, telling adopters that the “creation, trading and usage” of bitcoin as a medium of payment wasn’t authorized by any central bank or monetary authority, at the time.

Unlike previous alerts, the latest public notice includes a warning about initial coin offerings (ICOs), a popular new form of fundraising where companies raise capital in cryptocurrencies like bitcoin and Ethereum’s ether in exchange for their digital tokens.

The central bank wrote:

In the wake of significant spurt in the valuation of many VCs and rapid grown in Initial Coin Offerings (ICOs), RBI reiterates the concerns conveyed in the earlier press releases.

The RBI’s latest warning comes at a time when Indian retail investors are rapidly adopting bitcoin, despite soaring premiums.

While bitcoin isn’t officially recognized by authorities, it isn’t ruled illegal either. The ambiguity – repeated warnings aside – has seen India’s Supreme Court call on the central government to issue clear guidelines “to regulate the flow of Bitcoin” in the country.

In April, Indian authorities launched the ‘Virtual Currency Committee’, an interdisciplinary working group of representatives from multiple Indian governmental ministries and banks to research and propose a regulatory framework for cryptocurrencies in India. The committee is believed to have submitted its report to Indian finance minister Arun Jaitley in August. The contents and subsequent verdict on the regulatory and legal outcome of cryptocurrencies continues to be kept under wraps.

RBI Kolkata image from Shutterstock.