Bitcoin is a new technology that often works
differently to your prior experience. It therefore entails various risks that
you should understand. We have highlighted some of these risks below.
Bitcoin transactions are irreversible. If you
send Bitcoins to an incorrect address, or send the wrong amount of Bitcoins,
you cannot get them back. We cannot be held liable for executing a transaction
if the instruction relates to an incorrect Bitcoin address.
Before buying or selling Bitcoin, educate yourself
about Bitcoin. Buying and selling Bitcoin entails risks and could result in a
complete loss of your funds. Please ensure that you fully understand the risks
involved and do not invest money that you cannot afford to lose.
Bitcoin is not backed by any entity. Neither we
nor anyone else has an obligation to buy back your Bitcoins in the future.
Additionally it is very important to note the
- Bitcoin is not legal tender and
it is not backed by the government. Accounts and value balances are not
subject to any Government backed deposit insurance or any other Government
- Legislative and regulatory
changes or actions at the state or international level may adversely
affect the use, transfer, exchange, and value of Bitcoin;
- Transactions in Bitcoin are
generally irreversible, and, accordingly, losses due to fraudulent or
accidental transactions may not be recoverable;
- Bitcoin transactions shall be
deemed to be made when recorded on a “block chain” ledger, which is not
necessarily the date or time that you initiate the transaction;
- Bitcoin is derived from the
continued willingness of market participants to exchange fiat currency for
Bitcoin, which may result in the potential for permanent and total loss of
value of Bitcoin, should the market for Bitcoin disappear;
- There is no assurance that a
person who accepts a Bitcoin as payment today will continue to do so in
- The volatility and
unpredictability of the price of Bitcoin relative to fiat currency may
result in significant loss or tax liability over a short period of time;
- The nature of Bitcoin may lead
to an increased risk of fraud or cyber attack;
- The nature of Bitcoin means
that any technological difficulties experienced by a service provider may
prevent the access or use of your Bitcoin.
- Bitcoins being in digital form
are stored in digital/electronic media that are called electronic wallets.
Therefore, they are prone to losses arising out of hacking, loss of
password, compromise of access credentials, malware attack etc. Since they
are not created by or traded through any authorized central registry or
agency, the loss of the e-wallet could result in the permanent loss of the
Bitcoins held in them.
- Payments by VCs, such as
Bitcoins, take place on a peer-to-peer basis without an authorized central
agency which regulates such payments. As such, there is no established
framework for recourse to customer problems / disputes / charge backs etc.
- There is no underlying or
backing of any asset for Bitcoins. 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.
- It is reported that VCs, such
as Bitcoins, are being traded on exchange platforms set up in various
jurisdictions whose legal status is also unclear. Hence, the traders on
such platforms are exposed to legal as well as financial risks.
- There have been several media
reports of the usage of VCs, including Bitcoins, for illicit and illegal
activities in several jurisdictions. 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.
Reserve Bank has also stated that it is presently examining the issues
associated with the usage, holding and trading of Bitcoins under the extant
legal and regulatory framework of the country, including Foreign Exchange and
Payment Systems laws and regulations. (RBI
Press Release 2013-2014/1261)
The Reserve Bank of India advises that it has not given
any license / authorization to any entity / company to operate such schemes or
deal with Bitcoin or any virtual currency. As such, any user, holder, investor,
trader, etc. dealing with Virtual Currencies will be doing so at their own
risk. (RBI Press Release 2016-2017/2054)