Avoid virtual currencies like Bitcoin, RBI warns Indian shoppers

The Reserve Bank of India today warned the public against the use of virtual currencies such as the recently controversial Bitcoin, as such currencies gain the interest of internet shoppers.

Users of such virtual currencies expose themselves to financial, operational, legal, and security-related risks, India's central bank warned in a public circular, adding that these are highly speculative and unregulated instruments.

The RBI in its release warned that the creation, trading or usage of 'decentralised digital currency' or 'virtual currency', including Bitcoins, litecoins, bbqcoins and dogecoins as a medium for payment are not authorised by any central bank or monetary authority; and ''As such, there is no established framework for recourse to customer problems.''

According to SourceForge, an online platform that connects consumers to open-source projects such as Bitcoin and facilitates downloads, there have been 35,648 downloads in India since the launch of Bitcoins on 9 November.

A number of India-based trading platforms and exchanges have sprung up over the last six months, catering to Indian users by allowing them to purchase Bitcoins in rupees. The RBI, however, points out that no regulatory approval has been obtained by for carrying out such activities.

''There have been several media reports on the usage of Bitcoins for illicit and illegal activities. The absence of information of counterparties could subject users to unintentional breaches of anti-money laundering,'' the central bank said.

Bitcoin made international headlines earlier this year for the wrong reasons, as the company's share prices crashed and purchasers lost value.