{"id":11532,"date":"2021-11-17T05:57:00","date_gmt":"2021-11-17T05:57:00","guid":{"rendered":"https:\/\/trainingcentral.co.in\/?p=11532"},"modified":"2025-09-22T16:36:14","modified_gmt":"2025-09-22T11:06:14","slug":"risks-of-investing-in-cryptocurrencies","status":"publish","type":"post","link":"https:\/\/trainingcentral.co.in\/portal\/risks-of-investing-in-cryptocurrencies\/","title":{"rendered":"The Risks Of Investing In Cryptocurrencies: No Legal Backing, Frowned Upon By The RBI\u00a0"},"content":{"rendered":"\t\t
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Broadly, there is no regulatory support for cryptocurrencies, which exists for other investments in the form of a regulator and legal framework.<\/strong><\/p>\n\n\n\n

Nowadays, there is a new frontier of risks emerging in investments \u2013 that of\u00a0Bitcoin\u00a0and other cryptocurrencies. Reportedly, there are more than 10 crore crypto investors in India, far higher than in any other country in the world.<\/p>\n\n\n\n

As a percentage of population though, there are many countries ahead of India. The veracity of this data point of 10 crore crypto investors in India is yet to be established, as it is not from any official source. Nonetheless, one thing is for sure; the idea has caught on. And the reason is obvious: the meteoric rise in the prices of bitcoin and other cryptos. To put this number in perspective, it is much higher than the number of mutual fund investors and demat accounts in India. This scale has been facilitated through the various mobile-based apps that make bitcoin available in small affordable ticket sizes. Though you own a part of a bitcoin, you are participating in the price upside (or downside) in the market. Recently, the\u00a0government held meetings\u00a0ahead of the winter session of parliament to gather a consensus on introducing the planned bill on cryptocurrency.<\/p>\n\n\n\n

The risk in cryptocurrencies<\/strong><\/p>\n\n\n\n

We started off by saying this is a new risk in personal investments. What is that risk?<\/p>\n\n\n\n

For any investment, it is a pre-requisite that you have a basic understanding of what you are getting into, what the risks and potential returns are \u2013 in short, the risk-reward ratio. In cryptocurrencies, the basics itself are a grey area. If it is to be treated as a currency \u2013 yes, it can be treated as a currency as it is gaining increasing acceptance \u2013 the other side of the \u201ccoin\u201d has to be taken note of. The \u201ccurrency\u201d is gaining currency by private acceptance. Usually, a currency becomes a currency by sovereign acceptance in the country.<\/p>\n\n\n\n

In the case of bitcoin, the only one country to approve it as legal tender is El Salvador. More countries may follow suit in future, but by and large, the major countries of the world are against it. Which means, it is a \u201ccurrency\u201d by private acceptance, without legal sanctity. Let us look at the official stand in India.<\/p>\n\n\n\n

On April 6, 2018, the Reserve Bank of India released a Circular captioned \u201cProhibition on dealing in Virtual Currencies (VCs).\u201d It said that entities regulated by the Reserve Bank \u2013 Banks etc. \u2013 shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. It meant that the formal banking channels cannot be used for settling trades in cryptos or for to-and-fro flows from real money to cryptos.<\/p>\n\n\n\n

Regulatory tangles<\/strong><\/p>\n\n\n\n

However, the Supreme Court, in a judgement passed on March 4, 2020, set this Circular aside. Hence, for clarity, the RBI issued a Circular on May 31, 2021. The latest Circular says that \u201cIt has come to our attention through media reports that certain banks\/ regulated entities have cautioned their customers against dealing in virtual currencies . . . are not in order as this circular was set aside by the Hon\u2019ble Supreme Court.\u201d So far so good. Citizens have the right to use real currency (INR etc.) to purchase virtual currency and vice versa. However, one thing is clear.\u00a0RBI does not endorse cryptocurrencies\u00a0and is allowing transactions only because of the Supreme Court judgement. Moreover, the RBI is about to introduce the Central Bank Digital Currency (CBDC). In some quarters, CBDC has been described as a rival to crypto to be introduced by the RBI. However, these are not comparable and crypto is not legal tender in India. CBDC will be another form of legal tender currency, similar to the existing one, only that the mode will be digital.<\/p>\n\n\n\n

Broadly, there is no regulatory support for crypto, which is there in other investments, in the form of a regulator, an exchange, the legal framework, etc. In case of any dispute or theft through hacking of your computer or technical issues such as crashing of your computer hardware or misplacing of your password, you do not have a redressal mechanism.<\/p>\n\n\n\n

Should you buy cryptocurrencies?<\/strong><\/p>\n\n\n\n

Should you continue using the apps for participating in this market? Whether they will continue their meteoric rise or will crash, is anybody\u2019s call. Crypto is touted as the \u201cin thing\u201d of the future. Possible; there are so many things happening today that seemed like sci-fi during our childhood. However, before you\u00a0invest your hard-earned \u2018real money\u2019\u00a0in exchange for a virtual \u201ccoin\u201d or a \u201ctoken,\u201d you should have clarity on:<\/p>\n\n\n\n

-What is it you are investing in \u2013 is it an asset class such as equity or bond or gold?<\/p>\n\n\n\n

-What is the logic for your investments \u2013 is it that the apps make it easy and the TV commercials look impressive, or is it that you are convinced about it;<\/p>\n\n\n\n

-Do you have a basic understanding of the risks; and<\/p>\n\n\n\n

-What is a ballpark expectation on returns<\/p>\n\n\n\n

Check your money calendar for 2023-24 here and keep your date with your investments, taxes, bills, and all things money.

Source: https:\/\/www.moneycontrol.com\/news\/business\/personal-finance\/the-risks-of-investing-in-cryptocurrencies-no-legal-backing-frowned-upon-by-the-rbi-7729531.html<\/a><\/p>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Broadly, there is no regulatory support for cryptocurrencies, which exists for other investments in the form of a regulator and legal framework. Nowadays, there is a new frontier of risks emerging in investments \u2013 that of Bitcoin and other cryptocurrencies. Reportedly, there are more than 10 crore crypto investors in India, far higher than in any other country in the world. As a percentage of population though,… <\/p>\n

Read More<\/a><\/p>\n","protected":false},"author":192,"featured_media":21564,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":"","footnotes":""},"categories":[143],"tags":[],"class_list":["post-11532","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-contributed-articles","is-cat-link-solid-light is-cat-link-rounded"],"_links":{"self":[{"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/posts\/11532","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/users\/192"}],"replies":[{"embeddable":true,"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/comments?post=11532"}],"version-history":[{"count":7,"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/posts\/11532\/revisions"}],"predecessor-version":[{"id":24984,"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/posts\/11532\/revisions\/24984"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/media\/21564"}],"wp:attachment":[{"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/media?parent=11532"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/categories?post=11532"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/trainingcentral.co.in\/portal\/wp-json\/wp\/v2\/tags?post=11532"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}