The RBI worries about misuse of digital currency by terrorists and fraudsters for laundering money. As such it has cautioned a governmental parliamentary committee tasked with studying and developing a framework for digital currencies about the potential for their misuse by terrorists and fraudsters. Consisting of RBI representative, an inter-disciplinary committee has been constituted by the finance ministry to look at the regulatory framework with regard to virtual currencies.


  • RBI: Bitcoin is prone to misuse
  • An inter-disciplinary committee has been constituted by the finance ministry to look into the virtual currencies.
  • Digital currencies have the potential of misuse by criminals for laundering money.
  • The committee submitted its report last month to finance minister.

As bitcoin is making headlines and gaining public attention, India’s central bank has expressed its concern regarding bitcoin’s potential misuse. The Reserve Bank of India (RBI), the central bank of the country has warned a parliamentary panel on virtual currencies that bitcoin and digital currencies are “susceptible to misuse”.

The RBI worries about misuse of digital currency by terrorists and fraudsters for laundering money. As such it has cautioned a governmental parliamentary committee tasked with studying and developing a framework for digital currencies about the potential for their misuse by terrorists and fraudsters. Consisting of RBI representative, an inter-disciplinary committee has been constituted by the finance ministry to look at the regulatory framework with regard to virtual currencies. The central bank further said that it has not given any license and authorization to any entity or company to operate and deal with Bitcoin or any virtual currency. The parliamentary standing committee on finance was informed that any user, holder, investor, or traders of virtual currencies are at their own risk.

“It is true that while virtual currencies may have legitimate uses, some of their characteristics like anonymity make them susceptible to misuse or abuse”, said the RBI.

In view of the central bank, bitcoin and digital currencies have the potential of misuse by criminals for laundering money. The remarks of RBI come within months of directions of Supreme Court of India to check for bitcoin transactions in relation to terrorism funding and money laundering, reports the Times of India.

As there is no backing of any asset for virtual currencies, huge volatility in their values has been noticed in the recent past. However, with the immense rise in popularity of bitcoin, Arun Jaitley, finance minister of India has admitted that India’s bitcoin market had shown “notable growth” in recent years.

For this purpose, the finance ministry of India has set up an inter-governmental committee to study and suggest a framework for the regulatory and legal future of digital currencies in the country. The report submitted to finance minister Jaitley by the committee last month points toward authorities preparing regulations for the local bitcoin industry and taxation laws for the adopters. However, a ban is unlikely.

The tasks of the committee include:

  • To examine the present global regulatory and legal structures governing Virtual Currencies.
  • To take a stock of the present status of Virtual Currencies both in India and globally.
  • To suggest measures for dealing with such Virtual Currencies including issues relating to consumer protection, money laundering, etc; and
  • To examine any other matter related to Virtual Currencies which may be relevant.

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