The Reserve Bank of India (RBI) told the Bombay high court that it had not licensed or authorised any company to operate virtual currency schemes or deal in bitcoin and other virtual currencies. “People are using virtual currency at their own risk,” states the RBI’s affidavit filed in the high court in response to a public interest litigation (PIL) by city resident Dr KS Pillai in December 2016.
The RBI said it had “cautioned the users, holders and traders of virtual currencies, including bitcoins, about potential risks that they are exposing themselves to”.
The court had earlier ordered the RBI to respond to the PIL, which raised concerns over the legality and security of virtual currencies — such as e-wallets — purportedly operated by non-banking entities.
Dr Pillai said the RBI had permitted several non-banking entities to issue e-wallets, which is impermissible under banking laws. He alleged that a few entities had been operating e-wallets and smart cards without RBI authorisation.
Dr Pillai said non-banking entities were accepting deposits in electronic domains for payments under various brand names. He said that as this was a banking activity, it must be regulated under banking laws. He added that such operators remain unregulated, and so, the money deposited in e-wallets was in unauthorised hands.
Pillai had approached the court after high-value currency notes were demonetised last year.
He said he was worried that if private entities were not prevented from operating e-wallets and smart cards, customers’ money could be at risk.Pillai said e-wallets could be a good alternative to cash requirements, but the products must be routed through nationalised and scheduled banks, under RBI’s supervision.
Dr Pillai’s also asked the court to order that banking operations be stopped at unmanned ATMs. The RBI said it had instructed banks to migrate to EMV chips and PINs for all cards, replacing current debit cards by December 2018. It said this would ensure that all transactions were safe.
EMV is the global standard for credit and debit payment cards. It is based on chip-card technology and derives its name from card schemes developed by Europay, MasterCard, and Visa. Transactions done using these cards are often referred to as ‘Chip and PIN’ because the customer is required to enter his PIN to verify that he is a genuine cardholder.