India questions Bitcoin’s credibility; refrains from pronouncing it illegal
New Reserve Bank of India (RBI) Governor Raghuram Rajan has reiterated the central bank’s concerns over the credibility of virtual currencies like Bitcoin pointing out the ambiguities surrounding Bitcoin’s value.
Speaking at a technology conference in Mumbai, Rajan stressed on multiple issues surrounding Bitcoin including its stability, who controls its value, and how it interacts with paper based currencies among other things.
“One of the values of a currency is stability and the extent (to which) a currency is target of speculation as opposed to primarily a means of exchange,” he said while addressing the delegates at the conference.
Rajan refrained from pronouncing Bitcoin as illegal, but did say that there is a need “to understand the role of virtual currencies and how they will interact with the paper currency that you have”. He raised questions on who determines the value of Bitcoin.
“Can we have confidence in unseen, unknown centres who maintain the value of the currency, or an algorithm that will maintain the value of the currency – we need more credibility there.”
Back in December last year, RBI cautioned users on the risk associated with virtual currencies like Bitcoin. RBI noted in a press release that the process of creation, trading or usage of virtual currencies as a medium of payment hasn’t been authorized by any central banking authority and “no regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities.”
Just a couple of days after this circular multiple Bitcoin operators and exchanges in India suspended their operations temporarily until they could figure out a clearer framework with which they can carry out their operations.
However, that changed in January as quite a few exchanges lifted their temporary suspensions stating that they didn’t violate any of the guidelines set by the RBI. Further, they also stated that they were ensuring that they don’t get involved in illegal activities directly or indirectly.