With growing interest and reporting about fundamental currencies like Bitcoins, the Reserve Bank of India said on Tuesday these were highly exploratory and tolerant instruments, cautioning users about the probable financial, operational, legal security risks.
The RBI in a release said the making, trading or usage of 'Decentralised Digital Currency' or 'fundamental Currency' (VCs), including Bitcoins, litecoins, bbqcoins and dogecoins as a medium for payment are not authorised by any central bank or monetary authority.
"No rigid approvals, registration or authorisation is stated to have been obtained by the entities concerned for moving out such activities," it said, adding that it is keeping tabs on the developments.
Stating that virtual currencies have no underlying or backing of any resources and their value seems to be a matter of speculation, the RBI said, "The users are exposed to probable losses on account of instability in value."
Since VCs are stored in digital or electronic media, called electronic wallets, they are prone to losses arising out of hacking, loss of password, compromise of access testimonial and malware attack, the RBI cautioned.
The central bank said payments by VCs take place on a peer-to-peer basis without an authorised central agency, which regulates such payments, there is no established outline for recourse to customer problems or disputes.
The RBI said that the traders of VCs are exposed to legal as well as financial risks as VCs are being traded on exchange platforms set up in various jurisdictions, whose legal status is unclear.
The RBI added that it is presently investigative the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory support of the country, including Foreign Exchange and Payment Systems laws and regulations.