Reserve Bank of India Offers Cautionary Note on Bitcoin

It’s actually kind of odd to think of the Reserve Bank of India as being anything less than bullish on any mobile payments system except perhaps the very newest and unvetted.

After the ongoing cash catastrophe in the country pushed plenty of Indians into mobile payments systems, India is often considered to be a world leader when it comes to digital currency. However, RBI did issue a warning about bitcoin, and potentially not for the reason you’d think.

The RBI reportedly issued its new warning about bitcoin, not telling users to stay away, but rather instead to be “extremely cautious” when using bitcoin. The main reasons for the concern were related to a lack of overall regulation and some potential security issues.

More specifically, the language used in the warning goes like this: “The Reserve Bank of India advises that it has not given any license/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.”

The RBI notice went on to essentially wash its hands further, noting that no “central bank or monetary authority” had offered any kind of authorization for bitcoin, and that regulatory approval was virtually nonexistent.

However, reports from back in 2013 noted that the RBI was considering some kind of connection between overall operations and bitcoin, a point which may mean the RBI is just watching more closely for what it perceives as improvement.

Of course, there’s only so much that the RBI can see in the first place; half the point of bitcoin is that it’s not subject to the regulations of central banking authority, which is for many part of its appeal.

The reason that many suggested Greece may go to bitcoin during its disastrous austerity period was that it would be impossible for Greek authorities, or anyone else, to hyperinflate the currency and render it mostly useless.

So while the RBI has a point, much of what it sees as risk is what many see as a positive about the currency. Still, the RBI’s caution remains worth considering; be cautious when using bitcoin in any sense.