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Want To Invest In Bitcoin? Read These 7 Warnings From RBI Before You Risk Losing Your Money

The virtual currency Bitcoin has touched an all-time high value of $14,000 -- flirting with the $15,000 mark even. With such a meteoric rise in its value, how can anyone not be interested in investing in bitcoin?

Well, not so fast. Reserve Bank of India (RBI) has some warnings for all of you eyeing Bitcoin as a shortcut to becoming a millionaire.

The financial industry regulator has cautioned users, holders and traders of Virtual Currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security-related risks that they are exposing themselves to. Incidentally, India is not the only country to express caution on Bitcoins. Several other countries have placed restrictions on them as well -- including Russia, China, Iceland, Bangladesh, Sweden, Thailand and Vietnam.


Here's what RBI warning you against investing in Bitcoin at the moment..

1. RBI hasn't authorised any entity or company to deal with Bitcoin or any other virtual currency in India

RBI has clarified that it has not given any licence/authorisation to any entity/company to operate such schemes or deal with Bitcoin or any other virtual currency. Last week, finance minister Arun Jaitley too had said that the government has not granted any legitimacy to cryptocurrencies like Bitcoin.

2. Bitcoin is prone to hacking and malware attacks

Virtual currencies like Bitcoin ultimately reside in digital media or electronic wallets. Therefore, they are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack etc.

3. There's no legal recourse for any case of Bitcoin fraud

Payments by virtual currencies, such as Bitcoins, take place on a peer-to-peer basis without an authorised central agency which regulates such payments. And since Bitcoins aren't recognized by RBI, there is no established framework for recourse to customer problems and disputes at the moment.

4. Bitcoin value is based on 'speculation'

Unlike paper currency which is assigned a value against gold holdings, and other material factors, there is no underlying or backing of any asset for virtual currencies like Bitcoin. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value.

5. Bitcoin exchange platforms are set up in jurisdictions whose legal status is unclear

It is reported that virtual currencies, such as Bitcoins, are being traded on exchange platforms set up in various jurisdictions whose legal status is also unclear. Hence, the traders of virtual currencies on such platforms are exposed to legal as well as financial risks.

6. Bitcoins are used for illegal and terrorism activities

There have been several media reports of the usage of virtual currencies, including Bitcoins, for illicit and illegal activities in several jurisdictions.

The absence of information of counterparties in such peer-to-peer anonymous/pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.

7. RBI has constituted a group to look at the possibility of having a government-backed cryptocurrency

Meanwhile, the apex bank has constituted a group to look at the possibility of having a government-backed cryptocurrency.


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