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RBI warns users of virtual currency of potential risks

The RBI in a release said that the creation, trading or usage of 'decentralised digital currency' or 'virtual currency' (VCs), including Bitcoins, litecoins, bbqcoins and dogecoins as a medium for payment are not authorised by any central bank or monetary authority.

‘No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying out such activities,’ it said, adding that it is keeping tabs on the developments.  Stating that virtual currencies have no underlying or backing of any assets and their value seems to be a matter of speculation, the RBI said, ‘The users are exposed to potential losses on account of volatility in value.’

Since VCs are stored in digital or electronic media, called electronic wallets, they are prone to losses arising out of hacking, loss of password, compromise of access credentials and malware attack, the RBI cautioned. The central bank said that payments by VCs take place on a peer-to-peer basis without an authorised central agency, which regulates such payments, there is no established framework for recourse to customer problems or disputes. The RBI said that the traders of VCs are exposed to legal as well as financial risks as VCs are being traded on exchange platforms set up in various jurisdictions, whose legal status is unclear.

The RBI added that it is presently examining the issues associated with the usage and trading of VCs under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.

Reserve Bank lets cos issue tax-free bonds to overseas residents

Mumbai: The Reserve Bank of India on Tuesday allowed Indian entities to issue tax-free bonds to overseas residents for investment in infrastructure sector.

‘On a review, it has been decided to permit such resident entities/companies in India, authorised by the Indian government, to issue tax-free, secured, redeemable, non-convertible bonds in rupees to persons resident outside India...,’ RBI said. It also said fund raised has to be used for lending to the infrastructure sector. Besides, the borrowed fund can be kept in fixed deposits with banks in India pending utilisation by them for permissible end-uses, it said.
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