Want To Invest In Bitcoin? Read These 7 Warnings From RBI Before You Risk Losing Your Money

The virtual currency Bitcoin has touched an all-time high value of $14,000 -- flirting with the $15,000 mark even. With such a meteoric rise in its value, how can anyone not be interested in investing in bitcoin?

Well, not so fast. Reserve Bank of India (RBI) has some warnings for all of you eyeing Bitcoin as a shortcut to becoming a millionaire.

Reuters

The financial industry regulator has cautioned users, holders and traders of Virtual Currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security-related risks that they are exposing themselves to. Incidentally, India is not the only country to express caution on Bitcoins. Several other countries have placed restrictions on them as well -- including Russia, China, Iceland, Bangladesh, Sweden, Thailand and Vietnam.

ALSO READ: Beyond Bitcoin: How Blockchain Is The Foundational Building Block Of A Technological Revolution

Here's what RBI warning you against investing in Bitcoin at the moment...

1. RBI hasn't authorised any entity or company to deal with Bitcoin or any other virtual currency in India

RBI has clarified that it has not given any licence/authorisation to any entity/company to operate such schemes or deal with Bitcoin or any other virtual currency. Last week, finance minister Arun Jaitley too had said that the government has not granted any legitimacy to cryptocurrencies like Bitcoin.

ALSO READ: Bitcoin Miners Are Using More Electricity Than Ireland & Other 159 Countries. No Kidding.

2. Bitcoin is prone to hacking and malware attacks

Reuters

Virtual currencies like Bitcoin ultimately reside in digital media or electronic wallets. Therefore, they are prone to losses arising out of hacking, loss of password, compromise of access credentials, malware attack etc.

ALSO READ: From $1300 In January, Bitcoin's Price Just Went Past $14,000 In Under A Year & Is Still Rising

3. There's no legal recourse for any case of Bitcoin fraud

Payments by virtual currencies, such as Bitcoins, take place on a peer-to-peer basis without an authorised central agency which regulates such payments. And since Bitcoins aren't recognized by RBI, there is no established framework for recourse to customer problems and disputes at the moment.

4. Bitcoin value is based on 'speculation'

Unlike paper currency which is assigned a value against gold holdings, and other material factors, there is no underlying or backing of any asset for virtual currencies like Bitcoin. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value.

ALSO READ: 7 Things You Should Know About World's 1st Official Bitcoin Billionaires, The Winklevoss Twins

5. Bitcoin exchange platforms are set up in jurisdictions whose legal status is unclear.

It is reported that virtual currencies, such as Bitcoins, are being traded on exchange platforms set up in various jurisdictions whose legal status is also unclear. Hence, the traders of virtual currencies on such platforms are exposed to legal as well as financial risks.

ALSO READ: How One Tech Writer Threw Away $14.8 Million Dollars In Bitcoin Along With His Old Hard Drive

6. Bitcoins are used for illegal and terrorism activities.

There have been several media reports of the usage of virtual currencies, including Bitcoins, for illicit and illegal activities in several jurisdictions.

Reuters

The absence of information of counterparties in such peer-to-peer anonymous/pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.

WannaCry virus hackers collected ransom in Bitcoins from their victims to unlock their computers.

ALSO READ: Everything You Need To Know About Bitcoin, Now That It's Surged Past $10,000 Per Coin

7. RBI has constituted a group to look at the possibility of having a government-backed cryptocurrency.

Reuters

Meanwhile, the apex bank has constituted a group to look at the possibility of having a government-backed cryptocurrency.

This, if comes into being, can be an alternative to the rupee for digital transactions.