Reserve Bank of India Deputy Governor R Gandhi has raised concerns over virtual currencies such as Bitcoin and said they pose potential financial, legal, customer protection and security-related risks.
He said such digital currencies are not created by any authority but more and more people have started accepting them.
“We can see that in these types of virtual currencies there is no central bank or monetary authority. They pose potential financial, operational, legal, customer protection and security-related risks,” Gandhi said at a Fin Tech conference organised by Ficci, Indian Banks’ Association and Nasscom.
Gandhi said virtual currencies are stored in digital electronic form and are prone to losses arising out of hacking, loss of password, and malware attacks.
“No established framework for recourse to customer problem, disputes and grievances is feasible with this (virtual currencies) kind of framework.”
The Deputy Governor said a number of cases have been reported in which virtual currencies have been used for illicit and illegal activities.
“My arguments against virtual currencies stem from two elements — the concept of confidence and anonymity. The currency should be able to sustain these two elements forever. It will impair it’s exalted status once either of these two elements gets affected.”
He said the confidence in Bitcoin, or any other virtual currency based on blockchain, is also limited to its initial rounds and circles.
“The initial round is always filled with adventurists and risk seekers. The moment masses get in, the risk avoiders get in they will need greater confidence for its acceptance and continuance,” Gandhi said.